samchain/econo-pairs-v1 huggingface dataset:
It will then rise slightly and be on target in 2011. Considerable uncertainty in the assessment I would like to add that the uncertainty in our assessment is unusually large on this occasion. As always, it is therefore important to remember that the path we present for the repo rate is a forecast and not a promise. It may be necessary to cut the rate more, or less, than we are assuming now. If the financial crisis worsens, or if the effects on production and employment are more powerful than we believe, a lower interest rate might be necessary. However, if the krona were to remain weak or if inflation were to become entrenched at a high level, a higher interest rate might be necessary. The interest rate decisions we will make in the future will depend quite simply on how new information affects the outlook for inflation and economic activity in Sweden. We are following developments closely and are prepared to take action when necessary. A concluding reflection Around 15 years ago I was appointed head of the Swedish Bank Support Authority. Sweden was in the midst of a deep economic crisis; a crisis which had largely been caused by problems on home ground. The situation was serious, not least for the bank system, where loan losses during the recession totalled record sums. The Bank Support Authority was established as one of the measures taken to prevent the collapse of the Swedish financial system, in particular the payment system.

Although this announcement substantially reduced the probability of extreme events and led to an easing in the financial and credit markets, the economic situation in the monetary union remains vulnerable and the level of uncertainty is still considerable. A further source of uncertainty are the upcoming fiscal decisions in the US. Swiss economic outlook In Switzerland, real GDP in the third quarter increased again following a downturn, due to a temporary recovery in exports. For the fourth quarter, however, we again expect significant weakening in growth. Consequently, economic growth for this year is likely to come to around 1.0%, as forecast to date. For 2013, we expect growth of 1.0–1.5%. While the gradual revival in the global economy is having a supportive effect, the strength of the Swiss franc will hold back export momentum and corporate investment expenditure. Domestic demand is also likely to be restrained over the next few quarters. In view of the modest pace of growth, production capacity in Switzerland will probably remain underutilised in 2013. The rate of unemployment is likely to rise further. Given the fragility of global conditions, the downside risks also remain high for Switzerland. Monetary and financial conditions I will now turn to monetary and financial conditions, which are almost unchanged as compared to the situation in summer 2012. Interest rates in the Swiss franc money market continue to fluctuate around zero. Since mid-June, the three-month Libor has fallen from some 9 basis points to only 1 basis point. Interest rates in the repo market are predominantly negative.
This is a riskier phase of an infrastructure investment but banks are good at doing this. However, the new capital standards for banks do not make it attractive for them to hold on to these loans on a long term basis, even though the projects at the brownfield stage are operating smoothly. At the same time, there are many other investors, including insurance and pension funds, which may be looking for less risky investments that can produce steady long-term cash flow. Therefore I can see a good opportunity for banks to offload their loans to these long-term investors. However, it is easier said than done. There are many issues that need to be tackled. Just to name a few: the large transaction size of infrastructure loans makes concentration risk of (a) collateral a more prominent issue to be addressed, say as compared to the securitisation of a portfolio of mortgage loans comprising a large number of loans but with each being relatively small in size; apart from being large in size, infrastructure loans tend to be significantly less homogenous than the other types of asset for securitisation.

In fact, infrastructure (b) loans tend to be “unique” rather than “common”, and each can have its own risks and corresponding mitigation structures, which would pose challenges to the 2/3  BIS central bankers' speeches  structuring, rating and assessment processes; given such unique nature of infrastructure loans, originating and managing an (c) infrastructure loan portfolio require the asset manager to possess highly specialized skillsets and experience, and the track record of the asset manager is a key assessment criterion of rating agencies as well as prospective investors; the risk appetite of many long-term investors may need to adjust over time. Over the past few years, we have seen an increasing interest among conventional long-term investors like pension funds and insurance companies in infrastructure-related (d) assets, possibly because the conventional fixed income instruments have failed to provide a decent return amidst the long-depressed yield environment. However, the appetite of such investors tended to focus on the small set of prime quality, investment grade-tranche of infrastructure loan assets, whereas many infrastructure loans may fall in the sub-investment grade domain. 8. Ladies and gentlemen, the reputation of financial derivatives was badly damaged during the Global Financial Crisis. The mortgage-backed securities, CDO, CDO2 and CDO3, etc. all got a bad name, for good reasons.
16  20  21  22  23  24  Figure 14 a) World: Forecasts contained in latest MP Reports (annual change, percent)  6  Mar.21 Mar.22  Jun.21 Jun.22  Sep.21 Sep.22  b) Actual and projected prices (*) (dollars per pound)  Dec.21 Dec.22  5  5 4 3 2 1  Copper Sep.22 MP Report Dec.22 MP Report  16 4  17  18  19  20  21  22  23  24  (dollars per barrel)  3.2 3 1.9  2  Oil MP Report Sep.22 MP Report Dec.22  125 100 75 50 25  16 17 18 19 20 21 22 23 24  (index)  1  160 140 120 100 80  0  22  23 (f)  (f) Forecast. Sources: Central Bank of Chile and Bloomberg. FAO index MP Report Sep.22 MP Report Dec.22  16 17 18 19 20 21 22 23 24 (*) Actual price figure is average of each year. Dotted lines denote the 2022-24 forecasts contained in respective MP Report. Sources: Central Bank of Chile and Bloomberg.

Figure 6 a) Investment (index, 3T.19= 100, deseasonalized series) GFCF  160  C&W  b) Amounts invested (CBC) 2022Q3 (billions of dollars) M&E  16  Non-mining  c) Economic uncertainty (Depuc) (*) (index)  Mining  500  140  400  12  120  300 8  100  200  80  4  60 15  16  17  Source: Central Bank of Chile. 18  19  20  21  22  100 0  0 2021  2022  2023  Source: Capital Goods Corporation (CBC). 2024  2025  19  20  Source: Central Bank of Chile. 12  21  22  (*) Moving 30-day average. From December 2021 on, the index includes an update of the dictionary of words used for its construction, as a way of incorporating new elements that afect local conditions. Figure 7 Consumption (index, 3T.19=100, deseasonalized series)  180  Private consumption non-durable goods  Durable goods Services  160 140 120 100 80 60 15  16  17  18  19  20  21  22  Source: Central Bank of Chile.
Experience shows that in the process of arriving at a reasonable central rate, the factors which are considered include the country’s macroeconomic situation, various indicators of its competitive position, the exchange rate’s historical path and its average levels in recent years. When other currencies have been linked to the exchange rate mechanism, this has usually been done either at or fairly close to the prevailing market rate. ERM membership could stabilise exchange rate expectations A factor of importance for participation in the euro area is the krona’s stability. Membership of ERM2 could also facilitate Sweden’s entrance to the monetary union. It may therefore be appropriate to say something about the timing of an adherence to ERM2. This, as I mentioned, is a matter for the Government to decide. In the Spring Budget the Government has declared that participation in ERM2 is not being considered at present. The choice of an entry date presumably depends in part on the duration of ERM membership that other countries expect from Sweden before qualifying for participation in the euro area. Another central consideration is whether ERM membership as such can contribute to exchange rate stability and smooth the path to the euro area. In my opinion, ERM2 membership could help to stabilise exchange rate expectations if and when it is clear that Sweden does intend to join the euro area. That in turn would simplify the krona’s conversion into euro.

The Government may therefore raise the question of membership of the fixed exchange rate mechanism when future participation in the monetary union is judged to be imminent. Government decides exchange rate system, the Riksbank its application As regards ERM2, what are the Government and the Riksbank, respectively, responsible for? The Riksbank Act, amended as of 1999, states that the exchange rate system is decided by the Government and applied by the Riksbank. This is the same arrangement as in virtually the whole of Europe. The decision as to whether and when the krona is to be linked to ERM2 is thus a matter for the Government. The Riksbank in turn determines how the exchange rate system chosen by the Government is to be applied, which involves setting the central rate and band width in a fixed exchange rate system and deciding any interventions. In practice, if Sweden is to participate in ERM2, the law requires the involvement of both the Government and the Riksbank. They must also agree on the conditions. Moreover, ERM2 membership would not be decided unilaterally by Sweden; it is something that has to be negotiated with the other EU countries. n the event of Sweden wishing to join ERM2, what would be the procedure? The negotiations would be conducted in the Economic and Financial Committee, which has succeeded the Monetary Committee. Each country is represented there at the level of under-secretary in the Finance Ministry and central bank deputy governor.
While European labor markets are not – and will never be – as integrated as in the United States, goods, services, and capital markets are now fully unified, in many regards to a greater extent than in any other countries. Our studies show that business cycles tend to be more and more synchronized with time, an evolution which allows for greater efficiency and sustainability for a common monetary policy. This shows that monetary union is a self sustaining process: convergence can be a result, as much as a condition of economic integration. This has been termed the "endogeneity of optimum currency area" effects. Enlargement of the euro area As I said before, in contrast with some gloomy predictions made ten years ago, the euro is a success story. Far from being a closed Club, the Euro area is open and has a true calling for covering all the EU members, in so far as they fulfil the convergence criteria. Indeed, adopting the Euro can be seen as a legal obligation for all EU members once they have fulfilled the Maastricht convergence criteria. Monetary union is an on-going process. Starting in 1999 with 11 members, the Euro area has regularly expended. On 1 January 2001, Greece joined the Euro area. More recently, on 1 January 2007, Slovenia was the first of the 10 New Members  2  BIS Review 43/2007  States entered into the EU in 2004 to adopt the Euro; this brought the current number of members of the Euro area to 13.

In particular we need to establish stronger restraints on the build up of risks in the financial system over the cycle with the dangers they bring to the wider economy. That means not just increasing capital and liquidity requirements for individual institutions but relating them to the cyclical pressures in the system more broadly. One way of doing that has been developed in Spain. It is called “dynamic provisioning”. Chart 9 illustrates how it works. It requires banks to build up a general loss reserve during good times, based on past experience of likely losses on new lending. The effect is to build up reserves when loans are originated which can then be drawn down when the economy begins to deteriorate and actual losses are incurred. That would lessen the need to raise capital in downturns. And as draw downs on these general provisions would be automatic, the market should not view this as negatively as reductions in regulatory capital ratios. The second lesson comes directly from our experience with Northern Rock where even after the bank had become totally dependent on the State, there was no legal framework for resolving its future quickly and effectively. No regulatory regime can prevent all bank failures. So it is important, for financial stability, that any such failures are orderly. That is the role of the Special Resolution Regime, a key component of the Banking Bill.
The size of this “shadow banking” system – which in my view is a misleading term11 – has increased considerably in the euro area since the crisis, rising by almost 20% since 2008. It has also taken on a greater role in financing the real economy. At end-2013, outstanding amounts of loans from euro area non-bank financial intermediaries to euro area non-financial firms amounted to € trillion. But the key challenge from a policy perspective is to ensure that these funds make their way to the most credit-starved SMEs. Here I see two initiatives as particularly important. The first is to increase their capacity to lend directly to SMEs via loans or bond purchases. Here improving the information available for non-bank investors is key. A possible solution, proposed in the recent report of a high level expert group12 on finance for growth in Europe, is for European institutions to work with the private sector to establish a consolidated database on SME credit risk performance. Actions are also possible at the level of Member States. In Italy, for example, “mini bonds” for SMEs are guaranteed by the Italian state up to 70% of principal, and the results are promising so far. The second initiative is to increase the capacity for non-bank investors to lend indirectly to SMEs via securitisation. This requires a concerted effort to revive the flagging market for high  9  De Kok, J. et al (2011), “Do SMEs create more and better jobs”, EIM Business & Policy Research report, November 2011.

10 8  6 4 2 0 -2  Source: NBR  Debt instruments (intercompany lending)  2017p  2016  2015  2014  2013  2012  2011  Reinvested profit  2018H1p  Equity investments  2010  2009  2008  2007  2006  2005  -4  Figure 17. Inflation will stay in the target band in 2018 and 2019 CPI inflation  Source: NIS, NBR  CORE 2 adjusted inflation  Figure 18. Exchange rate evolution 107  250  1 January 2018 =100  106 200  105 104  150 103 102 100 101 100  50  99 98 1-Jan-18  0 1-Feb-18  1-Mar-18  EURRON Source: Reuters  1-Apr-18  EURPLN  1-May-18  EURCZK  1-Jun-18  EURHUF  1-Jul-18  EURTRY (rhs)  1-Aug-18  EURARS (rhs)  Figure 19. 5 year yield of FX government bond 11  9  7  5  3  1  -1 29-Dec-17  29-Jan-18  PL_5Y(eur) Source: Bloomberg  28-Feb-18  31-Mar-18  CZ_4Y(eur)  30-Apr-18  RO_5Y(eur)  31-May-18  30-Jun-18  TR_5Y(usd, rhs)  31-Jul-18  AG_8y(usd. rhs)  31-Aug-18  Figure 20. 10 year yield of FX government bond  10  8  6  4  2  0 2-Jan-18  2-Feb-18  PL_10Y Source: Bloomberg  2-Mar-18  CZ_18Y  2-Apr-18  RO_10Y  2-May-18  2-Jun-18  TR_10Y(usd, rhs)  2-Jul-18  2-Aug-18  AG_10Y(usd, rhs)  Figure 21.
Furthermore, a wide consensus among academics and policymakers has emerged over recent decades on the damaging effects of high inflation levels and variability on economic growth and, hence, on social welfare. Indeed, the history of monetary policy in the last 20 years or so is a very successful one. Price stability, as it is usually defined, is currently a tangible reality in most developed countries. Also, many less-developed countries previously prone to endemic high inflation have managed to reduce and stabilise it at reasonable levels, with noticeable effects on economic prosperity. I believe that the achievements of the last few years in terms of price stability are largely permanent. In the main, they respond to non-conjunctural factors such as a more refined conceptual understanding  BIS Review 34/2005  3  of issues like the temporal and uncertain nature of the trade-off between output and inflation, to institutional reforms -such as central bank independence- and, probably, to greater social awareness of the benefits to be had from sustained low inflation. Although low and stable inflation is a clear prerequisite for macroeconomic stability, this does not per se eliminate the potential risks of disturbances that can adversely affect economic performance. This is the case of negative demand shocks which can generate deflationary processes.

Their economic capital is procyclical today and Basel II does  6  BIS Review 34//2005  not alter the calculation of economic capital; if anything it can help to promote cycle awareness. In this regard I tend to think that the role of regulatory capital is overstated and the degree of risk sensitivity of banks’ behaviour today is underestimated. Furthermore, the most abrupt and procyclical behaviour will probably occur in a poorly provisioned and poorly capitalised bank with inadequate risk management. In a downturn this bank will most likely encounter unpleasant surprises stemming from mismanaged risks and, lacking appropriate shock absorbers (provisions and capital), it will have little room for manoeuvre. The most likely outcome is an abrupt cut-back on lending, therefore contributing to exacerbating the cycle. I mentioned before the importance of risk awareness and early detection and reaction by banks. I will just emphasise here that these are also important elements for restraining procyclicality. On the supply side, I have already commented on the beneficial effects of higher transparency in the information released by banks, especially after accounting for the fact that lender-investor informational asymmetries could result in a lower-than-optimal level of funds available for bank lending. Pillar 3 will thus grease the wheels of the market for bank capital, building up capital providers’ and depositors’ confidence about the efficient use of their resources and easing the conditions under which banks may gain additional funding if required.
The way forward Structural changes and our experience over the last ten years will thus be of significance for monetary policy going forward. But what does this mean in more concrete terms? 12 See Financial Stability Report 2017:2, Sveriges Riksbank. 10 [13]  The main direction is determined by international developments To begin with, it is important to bear in mind that the Swedish economy is very dependent on developments abroad. Just as before, the main direction of the Swedish economy will follow international developments. I have already discussed how significant the global level of interest rates is for interest rates in Sweden and hence for monetary policy. In addition, the economic outlook and inflation prospects will, to a large extent, be influenced by what happens abroad, especially in the rest of Europe. One special circumstance is that economic activity and normalisation of economic policy will be in a different phase in the euro area than in the United States in the coming period. This is not so strange given developments over the last ten years. But as Swedish economic activity has been stronger than in the euro area, normalisation here at home looks as though it might start earlier than in the euro area, according to our forecast. In other words, we will probably be after the US central bank but slightly before the ECB. This is a special situation that can affect the impulses from abroad as regards economic activity and inflationary pressures. Inflation can rise in different ways.

High indebtedness is making household finances more sensitive to interest rate adjustments When monetary policy gradually starts to normalise and interest rates rise, it will happen against this backdrop of high indebtedness among households and high housing market valuation. In addition, many have taken out variable-rate mortgages with short interest-rate fixation periods. Taken together, this means that household finances are now more sensitive to adjustments in interest rates than before. Disposable income, that is income minus borrowing costs, is affected to a greater extent by interest rate adjustments when debt is high, all other factors being equal. Calculations show that an interest-rate rise of about 1 percentage point now has a significantly greater direct effect on household disposable income than in the mid1990s. In this sense, households’ interest-rate sensitivity is now greater. 6 The interesting question is whether households adapt their consumption to a corresponding degree so that consumption also changes to a greater extent. It need not necessarily be so. For example, interest income can offset the effect of higher interest expenditure. If households also plan in advance for a scenario where interest expenditure takes a greater share of their income, consumption may not necessarily be affected to any great extent. But research findings point to this potentially playing a major role at least for certain groups of households. 7 More specifically, it is shown that highly indebted households with variable-rate mortgages adapt their consumption to a greater extent than other households when interest rates change.