samchain/econo-pairs-v1 huggingface dataset:
For those who are not native speakers of money market jargon, the federal funds and Eurodollar deposit markets are very similar: They are wholesale funds taken in by banks, with definitional differences that I’ll leave to the footnotes to my speech.31 Just this past October, following amendments to the FR 2420 collection, we began to receive trade-level data for the bulk of activity in the Eurodollar market.32 The Eurodollar market is considerably larger than the federal funds market. According to FR 2420 data, on average in the last two months of 2015 there was $ billion of overnight borrowing in the Eurodollar market; in contrast, over that same period, there was $ billion overnight borrowing in the federal funds market.33 I’ll show some data on the composition of activity in these markets a bit later, but it’s worthwhile noting that many of the Desk’s nonbank counterparties, such as the money funds, are active lenders in the Eurodollar market. We observed a similar response in yields in the Eurodollar market as we did in the federal funds market, with the distribution of traded rates making a parallel shift upward of about 25 basis points, as shown in Figure 4. Since liftoff, the overnight Eurodollar volume-weighted mean rate as calculated from FR 2420 data, as seen in Figure 5, has averaged about 35 basis points.34 This is in line with the effective federal funds rate. The volume-weighted median, also shown in the figure, moved upward by a like amount.

So we couldn’t completely rule out that the federal funds rate and BIS central bankers’ speeches  3  other money market rates might not go up one for one with rises in administered rates. One might also worry that money market rates might not move together as rates rise, meaning that, for example, a disconnect might emerge between secured and unsecured rates, or between overnight and term instruments.24 Either situation could result in impaired transmission of monetary policy into broad financial conditions. Assessing the performance of the new framework To summarize my conclusion about the performance of the operating framework to date: I am extremely pleased with what we’ve seen so far. In discussing why I view the framework as effective, it’s helpful to start by explaining what it means for the tools to work well. I think about this issue through three lenses: interest rate control, avoiding unintended impact on the structure of the financial system, and avoiding financial instability. I’ll touch on what each of these mean, and then I’ll review the quantitative evidence since liftoff on how well things have gone. Interest rate control Clearly, interest rate control is the paramount objective. It is of great importance that the public is confident that the federal funds rate will be, on average over time, within the target range set forth by the FOMC, and that other money market rates will continue to move closely with changes in the federal funds rate.
Indeed, the UK’s Financial Conduct Authority (FCA) has reiterated that the pandemic has not altered the central assumption that firms cannot rely on LIBOR being published after the end of 2021.3 In fact, the FCA has said that even though LIBOR will continue until then, announcements about its end could come as early as this November or December.4 The Financial Stability Board (FSB)—which is chaired by Randy Quarles, the Federal Reserve Board’s Vice Chair for Supervision—has also emphasized that the pandemic should not prevent firms from removing any remaining dependencies on LIBOR by the end of 2021.5 The Alternative Reference Rates Committee (ARRC), which is the private-sector committee convened by the Federal Reserve to facilitate the transition away from U.S. dollar LIBOR, has recommended that floating-rate notes, syndicated loans, consumer loans, and securitizations should already include definitive fallbacks to cope with the end of LIBOR, and has set target dates by which no new LIBOR-based products should be issued.6 The ARRC also has provided a timeline and resources to ensure that vendors and operational systems are ready for the switch to alternative rates.7 Why? Because having a LIBOR transition office and a high-level plan is not enough. Do not underestimate the operational, technical, legal, communications, and risk management work that will be required to move existing transactions off of LIBOR and prepare to use an alternative rate. It will take time and resources, and the price of failure or delay in any of those areas could be high.

24 Supervisory issues associated with benchmark transition: Report to the G20, July 9, 2020. 25 BCBS, Basel Framework frequently asked questions, June 2020. 26 Federal Financial Institutions Examination Council Joint Statement on Managing the LIBOR Transition. 27 OCIE, Risk Alert: Examination Initiative: LIBOR Transition Preparedness, June 18, 2020.  https://www.newyorkfed.org/newsevents/speeches/2020/hel200929  6/6
3 / 10  BIS central bankers' speeches  The slide in the annual growth rate of loans extended to the non-financial sector came to a halt in the third quarter of 2016 owing to reduced tightness in monetary conditions, macroprudential measures that support the financial system and government incentives (Chart 6). Commercial loans continued to grow faster than consumer loans in this period as well. Although the gradual fall in our marginal funding rate partially passed through to loan and deposit rates, loan standards remained partially tight in the third quarter. However, I would like to state that consumer loans have recently rebounded on the back of the favorable effect of our liquidity policies on banks’ domestic funding conditions and emerging effects of macroprudential policies (Chart 7). 2. Macroeconomic developments and main assumptions 4 / 10  BIS central bankers' speeches  Estemeed Guests, Now, I will talk about the macroeconomic outlook and our assumptions on which our forecasts are based. First, I will summarize the recent inflation developments. Then, I will continue with the domestic and external demand outlook upon which we based our projections. Consumer inflation ended the third quarter at 7.28 percent, remaining consistent with the lower bound of the July Inflation Report forecast (Chart 8). The fall in inflation was mostly driven by prices of core goods and unprocessed food, whereas annual inflation in tobacco and energy was up.

Consumer inflation was in line with the forecasts of the July Inflation Report in the third quarter of 2016, with core goods and unprocessed food pulling underlying inflation down. Domestic demand was subdued in the third quarter but leading indicators signal that economic activity will pick up by the fourth quarter of the year. Moreover, despite downside risks to external demand due to geopolitical tensions, the external trade balance continues to improve amid increasing EU demand. On the other hand, developments regarding tourism revenues cause a slight widening in the current account deficit. 1. Monetary policy and monetary conditions Esteemed Guests, We continued with monetary policy simplification in the third quarter on the back of improved core inflation indicators, the favorable course of the global risk appetite and the effective use of monetary policy tools. Accordingly, we lowered the marginal funding rate to 8.25 percent by three consecutive 25 basis point reductions in July, August and September. On the other hand, in October, we left the policy rates unchanged in view of less tight financial conditions and spillovers of other cost factors to the inflation outlook. Hence, we kept the marginal funding rate, one-week repo auction rate and the overnight borrowing rate constant at 8.25, 7.5 and 7.25 percent, respectively (Chart 3). As you all know, with simplification, we aim to provide funding via a single rate, which will bring short-term market rates closer to the funding rate.
We engaged with them to discuss these risks and how “de-tiering” could alleviate them. Each of these banks now accesses CHAPS directly. Over the last year, they accounted for 17% of total CHAPS values, demonstrating a clear and measurable reduction in risk, which in turn, benefits the wider payments ecosystem and all of its participants and end users. In April 2012, after consultation with all CHAPS participants, formal tiering criteria were introduced to CHAPS based on a presumption that Indirect Participants that breach the criteria should transition to direct access. The Bank will continue to analyse the financial stability risks presented by indirect access and further refine if we consider there is an unacceptable level of risk. Expanding eligibility to non-banks. Where it can be done safely without compromising our mission to maintain monetary and financial stability, we also seek to promote efficiency, innovation and competition through our operation of RTGS and CHAPS. We have therefore recently widened the access criteria for RTGS and CHAPS to enable non-bank PSPs to join. Key to this was working closely with the FCA, HM Treasury and the PSR to develop a supervisory regime that would allow non-bank PSPs to access settlement in RTGS and participation in the CHAPS payment system without increased risks. In April 2018 Transferwise was the first non-bank PSP to join RTGS and was followed by iPagoo who in August 2018 was 8 i.e.

Therefore, AFI has an important role in leading the way in gathering examples of best practices based on specific country experience, in the area of financial inclusion and its relation to financial stability and consumer protection objectives. AFI is therefore also a key platform that brings together policymakers, financial service providers, telecommunication and technology industries to have greater awareness on the trends that can support the advancement of financial inclusion. Additionally, AFI’s engagement with international organisations is also key given the implications of their initiatives on financial inclusion. Conclusion Let me conclude. There is now greater appreciation that the level and quality of financial inclusion will have a significant impact on the prospect for balanced and sustainable growth. AFI has demonstrated its important role in leading the way for greater financial inclusion in the world economy. AFI is unique because its membership covers practitioners from developing and emerging economies, who can share approaches that can be customised to a respective country’s unique circumstances. We begin this two day global policy forum, with our vision firmly focussed on our long-term goal of universal access to quality financial services which will provide our communities with the chance to change. This Global Forum and AFI provides an unparalleled opportunity that brings together strategy, knowledge, expertise and best practices from across the AFI membership. This provides us with the real potential to make a difference in financial and economic inclusion and thus with the potential to transform lives. Thank you. 4  BIS central bankers’ speeches
In many cases, these obstacles sap entrepreneurial spirits, especially of young, innovative firms that create most of the new jobs and that are highly sensitive to changes in investment opportunities. These examples show how converging towards best practice in the euro area would mean radical improvements in the business environment. Spain provides an encouraging example in this regard. Among the large euro area countries, investment in Spain is projected to rebound strongly over the coming two years, notably due to the combination of business-friendly reforms and lower personal and corporate taxes. More recently, other countries have also committed to improve the business environment. A forceful and swift implementation of the necessary reforms is now key in order to reap the benefits as quickly as possible. 2  BIS central bankers’ speeches  Strengthening the financing side A second area of key relevance for investment and also of direct interest to the Eurofi community here tonight is the need to diversify sources of financing and to overcome financial fragmentation. Until now, banks have been the main source of lending to companies. The crisis has shown the drawbacks of over-reliance on a bank-centred lending model. So we also need to develop reliable sources of non-bank lending, such as equity and bond markets, securitisation, lending from insurance companies and asset managers, venture capital and crowdfunding. This is why the ECB fully supports the intention of the incoming President of the European Commission to create a capital markets union.

Norman T L Chan: Symposium on Financial Stability – opening remarks Opening remarks by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary Authority, at the HKMA Financial Stability Symposium, Hong Kong, 30 May 2013. *  *  *  Good Morning Ladies and Gentlemen, 1. Welcome to the HKMA Financial Stability Symposium. The Symposium marks the 20th Anniversary of the HKMA, which is a very young central banking institution comparing with its peers. It is very timely and appropriate for the HKMA to convene this Symposium on Financial Stability because Hong Kong, like many of our Asian neighbours, have learnt from our own bitter experience in the few years after 1997 just how painful and devastating financial crisis can become. So it is clearly our common wish to do what we can to reduce the risks of financial crisis recurring or at least mitigate the damage that it can cause to the financial system and the economy when it occurs. 2. In this connection, it may perhaps be useful to look back and observe how the mainstream thinking on financial stability have changed or evolved since the time when the HKMA was set up in 1993. I would list a couple of key issues below: (i)  there was the belief that financial crises would only occur in the developing economies because they had weak financial institutions and poor regulatory regimes. Advanced economies would be immune as they had mature financial institutions and robust regulatory systems.
There are three ways we can achieve this: The first is by enhancing offshore RMB liquidity. As mentioned earlier, the HKMA’s currency swap agreement with the People’s Bank of China was enhanced in July. Apart from the overall increase in the size and removal of the need for renewal of the swap agreement, on the back of this, the HKMA enhanced its RMB Liquidity Facility, and the important changes include: Expansion of both intraday and overnight repos from RMB10 billion to RMB20 billion each, providing an additional RMB20 billion in liquidity to the market; Extension of the overnight repo operating hours from 6 pm to 5 am the next day (when the RMB RTGS system closes), making operation more flexible and streamlined, especially for those in other time zones; and Reduction of repo rates of the overnight repo, with the spread over CNH HIBOR lowered from 50 to 25 basis points. We will constantly monitor the need for further enhancements to keep RMB liquidity in Hong Kong at the optimal level. The second approach is to facilitate the development of more diverse offshore RMB products. The expansion and enhancement of the Connect schemes to promote the cross-boundary use of the RMB and facilitate further portfolio flows into and out of the Mainland is crucial. Southbound Trading under Bond Connect and Wealth Management Connect have created new opportunities for investors and increased the usage of the RMB in capital markets and wealth management. We will consider enhancements to Southbound Bond Connect to enrich Hong Kong’s bond market.

More importantly, deepening the offshore RMB liquidity pool will enhance market efficiency and underpin the growth of offshore RMB activities, strengthening Hong Kong’s development as a leading offshore RMB hub and its unique role in the internationalisation of the RMB. 7. There have also been significant developments in the internationalisation of the RMB as well: The establishment of an RMB Liquidity Arrangement by the People’s Bank of China and the Bank for International Settlements, announced in June, will provide support to participating central banks in times of market fluctuation. The HKMA is pleased to join the initial group of participating central banks in the Asia-Pacific region. The inclusion of Chinese Government Bonds in FTSE Russell’s World Government Bond Index is testimony to the acceleration in the international use of the RMB. The increased prominence of the RMB in international trade and foreign currency reserves was underlined in May when the International Monetary Fund increased the RMB’s weighting in its Special Drawing Rights basket from 10.92% to 12.28%, the first time the weighting has been reviewed since the RMB was added to the basket in 2016. Opportunities ahead – development strategy 8. The liberalisation of the Mainland capital markets in recent years has resulted in rapid growth in cross-boundary capital flows. Hong Kong’s mutual market access schemes with the Mainland, like Stock Connect, Bond Connect and now ETF Connect, have further catalysed this process by encouraging greater portfolio investment into the Mainland. 9.
In the space of five years (1792-97) it almost tripled, and Pitt’s government tapped not just financial markets but the resources of the Bank of England to finance it18. Second, fears of French invasion led to a steady increase in the desire to hold gold over paper notes and a further drain from the Bank’s holdings (Chart 1119). When in late February 1797 a small French force actually landed in Wales the government immediately took to the decision to suspend  Sources: Thomas and Dimsdale (2017) and Bank calculations. convertibility and with it the gold standard. This was a seismic event in British financial history and was vigorously debated, and in many quarters vigorously opposed, throughout the long Napoleonic wars20. Several early economists – notably  16  Kynaston (2017), Chapter 15. I discussed the role of beliefs about how inflation was determined in a talk earlier this year (Broadbent (2020)). 18 The Bank took only a fraction of new government debt – less than £ compared with an increase in the total of over £ – but it was enough to deplete its gold reserves significantly, by around a quarter, during the first four years of the war. Most of the growth in the Bank of England’s assets, in those years and throughout the Napoleonic wars, reflected higher “discounting” (i.e. buying) of private-sector securities. 19 Chart 11 excludes long-term government debt holdings from the assets and central bank equity from the liabilities.

To any existing bondholder the extra inflation therefore comes as a surprise and the real value of that existing debt starts to fall, without any compensating rise in nominal coupons. Conventional debt is assumed to mature at a constant rate, such that half of it has to be refinanced over a 12-year period. The starting level of the debt:GDP ratio is indexed at 100. The simulation assumes that a quarter of the debt is indexed, the remaining three quarters made up of conventional bonds13. With an extra percentage point of inflation the real value of existing conventional debt is initially eaten up at that same rate. Over time, however, maturing lower-yielding debt has to be refinanced at the higher cost and the rate of decline slows. So although after 18 years the price level is almost 20% higher than it would have been, the real value of conventional debt is down by less than 7%. With indexed debt unaffected the peak decline in the aggregate debt:GDP ratio, which comes at around that 18-year point, is just under 5%. Thereafter, as the share of the original debt continues to decline, the higher cost of newer debt starts to dominate and the debt ratio starts very gradually to climb back to its original level. Clearly larger rises in inflation would produce a bigger effect. But because more rapid inflation means the share of the original, pre-inflation debt also declines at a faster rate the effect isn’t quite one-for-one.
In my view the reasons include the increased role of services in the economy, the importance of labor costs in such an economy, the reduced share of oil consumption relative to GDP, and as I mentioned earlier the improved conduct of monetary policy versus the 1960s and 1970s.5 Figure 10 shows that the service sector has grown from a little over 60 percent of private sector employment in 1970 to a little over 80 percent in 2010. As the economy has come to emphasize services versus manufacturing, it may be that commodities (and thus their prices) have become somewhat less important to the production of goods and services. And goods prices are more volatile than services prices, and more likely to be priced like commodities. Figure 11 shows the per capita consumption of oil declining in the United States. Conservation measures by consumers and businesses have made the economy less dependent on oil than in the 1970s. While oil remains a very important commodity, the trend towards reducing dependence on oil provides greater insulation from oil-induced supply shocks. Figure 12 shows the U.S. share of world oil consumption (in blue) ticking down, but also clearly shows (in red) the steady climb in the share consumed by three of the so-called emerging-market economies – China, India, and Brazil. Figure 13 shows the growth in oil consumption in those three countries, in the upper three lines. Both charts depict quite strikingly the heightened demand for oil emanating from emerging markets.

We at the Fed need to very closely monitor the data to make sure that inflation remains contained. And we will. But as I believe I will demonstrate this morning, the most likely result is that these supply shocks cause slower growth in the near term while having only a modest effect on longer-term inflation rates – which has been the U.S. experience since 1986. Unemployment remains quite elevated, at 8.8 percent, and I anticipate a slower return to full employment than we would have experienced absent these supply shocks. With the core inflation rate over the prior year at a little above 1 percent, I anticipate only a gradual return of core and total inflation rates to something like our consensus “stable” rate of about 2 percent, over the medium term. If the economic data continue to support this outlook then the current, accommodative stance of monetary policy is appropriate, and can remain in place and continue to support economic growth – so that we continue to make progress toward our goals of returning to full employment and a sustainable long-run inflation rate – the two elements of the Federal Reserve’s dual mandate from Congress. 1  My colleague Geoffrey Tootell, Director of Research at the Boston Fed, has prepared an illuminating public policy brief that investigates whether commodity price spikes cause long-term inflation.