samchain/econo-pairs-v1 huggingface dataset:
The purpose of these reports is to examine the progress made by non-euro area Member States in the fulfilment of their obligations with regard to the achievement of economic and monetary union. This year’s Convergence Report will cover Greece and Sweden. For Denmark and the United Kingdom, which have a special status, the convergence examination is only to be carried out at their explicit request. However, no such request has been made. According to our current planning, the Convergence Report is to be published on 3 May. In this context, I should also like to take the opportunity to confirm that, as envisaged, the ECB will present its Annual Report for 1999 on 12 April, to be discussed in your Committee on 17 April 2000. EU enlargement is another area in which the ECB has assumed an increasingly active role. Even though the ECB is not an official party to the accession negotiations, it goes without saying that the Eurosystem’s views in its areas of competence should be properly taken into account. This applies, in particular, to the provisions needed to guarantee central bank independence, the liberalisation of capital movements, sound banking systems and overall financial stability. Against this background, the ECB is closely monitoring the EU enlargement process, which has implications - already at this stage - for economic and monetary developments in accession countries. Moreover, the ECB has, following the Helsinki seminar of last November, further intensified its bilateral and multilateral contacts with central banks from accession countries.

In Luxembourg there are one or two institutions that rank among those with the highest exposure to mortgages in Europe. If a shock affects this cluster of assets, then they are at risk. Household indebtedness in Luxembourg is higher than in other countries – however the wealth of these households is also higher than in other countries, and disparities between the holders of assets and liabilities also have to be considered. What is specific to Luxembourg is that the price pressure on the housing market is growing faster than in many other countries. We’re speaking of a 7% increase while the economy is growing at only half that rate. We’re speaking of a more than 50% increase in house prices over the last eight or nine years. This is mostly explained by the insufficient supply and by the strong demand resulting from labour inflows. This also results in wealth per capita in Luxembourg not growing. In turn, that creates the impression that wealth is not being fairly distributed. To sum up, Luxembourg is not running into a wall but risks are clearly there and actions have to be taken, as recommended by international and domestic institutions. What actions? That’s up to the national authorities. It’s not a matter of monetary policy. Monetary policy is a blunt weapon. But those best equipped to deal with the situation are the national authorities, as they are the closest. This is why macroprudential policy, as it is called, is in the hands of the national authorities.
In March this year, we issued a circular, telling financial institutions to be alert to additional money laundering/terrorism financing risks when dealing with legal persons and arrangements which are used for wealth management purposes, including family offices. Family offices in Singapore are already substantially covered for money laundering risks. Multi Family Offices, which manage third-party funds and are licensed by MAS, are already subject to the same anti-money laundering controls that we apply on all regulated financial institutions. Likewise, the majority of SFOs in Singapore – which are granted tax incentives by MAS – are required to have an account with a bank in Singapore, and are thus subject to the anti-money laundering controls applied by our banks. The remaining SFOs are likely to have engaged the services of other financial institutions or professional services entities such as lawyers or corporate service providers in Singapore who are similarly required to apply suitable anti-money laundering measures on their clients. MAS will take additional measures to strengthen surveillance and defence against money laundering risks in the SFO sector. Specifically, we will require all SFOs to: notify MAS when they commence operations and also annually; and maintain a business relationship with an MAS-regulated financial institution that would perform anti-money laundering checks on these SFOs. MAS will soon release a public consultation paper on these proposals. Even as we manage the risks posed by wealth inflows, it is important that the management of this wealth benefits Singapore and serves a larger purpose.

In the 11 FYs since the last recapitalisation, MAS returned a total of $ billion to the Government, more than two times the amount of the latest increase in capital. In sum, the $ billion net loss is not cause for concern though the investment performance bears close watching. The loss does not impair MAS' ability to carry out its functions. More importantly, it does not change how we will conduct monetary policy. The loss does not result in a draw on MAS' past reserves. The OFR position remains healthy even after MAS transferred $ billion of excess OFR to the Government. But the investment performance is likely to remain weak amid a challenging macroeconomic and financial market environment. A return to profitability and ability to contribute again to the Government's Consolidated Fund will take some time. HOW IS MAS HARNESSING THE BENEFITS AND ADDRESSING THE RISKS OF WEALTH INFLOWS? I will now move on to the topic of wealth flows into Singapore. This issue has attracted much media and public interest. MAS has focused on harnessing the benefits of these wealth inflows while addressing their risks. But before explaining how we do this, let  9/16  BIS - Central bankers' speeches  me try to set the wealth inflows in context. First, as a trusted, vibrant, and well-regulated international financial centre, Singapore has attracted large inflows of wealth to be managed here. Assets under management (AUM) have grown an annual average of 15% during 2017 to 2021.
The two main risks are liquidity and solvency risks. I will start with liquidity risk, which arises from the tension between the lesser willingness of lenders to lend and the higher financing needs of firms. The pandemic has increased credit risks perceived by lenders, which together with the higher economic uncertainty, might discourage them from lending. Some lenders might react by demanding a higher risk premium on the interest rate charged on their lending operations, while others may instead decide to cut the amount they are willing to lend. This pattern has been observed in previous crisis episodes and, in particular, during the Great Financial Crisis. For firms, the shock implies a significant fall in their turnover due to the lockdown measures introduced by authorities to prevent the spread of the virus. The turnover reduction together with the existence of fixed costs translates into an increase in firms’ liquidity needs. Firms may cover part of these needs by using their liquid assets or by resorting to the undrawn amounts in their credit lines, but in many cases these buffers will not be large enough considering the size of the shock. Therefore, firms will try to cover their remaining liquidity needs by resorting to fresh borrowing. The result will be an increase in credit demand against the background of a possible contraction in credit supply. The severity in firms’ liquidity risks depends on the amount and composition of liquidity shortfalls and the buffers firms have to cover them.

According to micro simulations conducted by Banco de España staff, 68% of firms would have liquidity shortfalls2 between  2  The definition used here considers that a firm has a liquidity shortfall when cash inflows, basically arising from the sales of products or services, are below the payments relating to their operating activity (supplies, rentals, financial expenses and personnel costs) and those arising from their decisions to invest in fixed assets and debt repayments. 3  April and December 2020, almost 10 pp higher than under a counterfactual scenario of no pandemic3. It is estimated that the corporate sector’s overall liquidity shortfalls between Q2 and Q4 2020 will amount to around EUR 230 billion. Ignoring liquidity needs associated with investment in fixed assets, which are less relevant for liquidity risks as this expenditure has a lower degree of commitment and can more easily be avoided, the liquidity shortfall during the same period is estimated to be around EUR 25 bn higher than under the no-pandemic counterfactual scenario. Additionally, results show that more than half of these liquidity needs could not be covered through the use of both firms’ liquid assets and the undrawn amounts of their credit lines. These simulations also show that a prominent portion of firms’ aggregate liquidity needs would be generated by companies of low credit quality, which are expected to have more difficulty gaining access to credit, especially in periods of high uncertainty and increasing concerns over credit risks.
The Banque de France was the first to start a programme of eight experiments on a wholesale CBDC, notably with a number of Fintechs, to improve the functioning of the financial markets and institutions. If necessary, the Eurosystem could decide to issue a retail CBDC to ensure the general public have access to central bank money, especially in countries where cash payments are in decline. The ECB has created a high-level task force whose report we published ten days ago. We will now launch a public consultation, starting today, examine all regulatory and technical issues, and begin experiments at the national central banks – the Banque de France will contribute actively to this. Between now and mid-2021, the Eurosystem will decide whether to launch a project for a digital euro, which would start with an investigatory phase. And while we’re on the topic, let me just comment on the terminology used: you sometimes hear people talk about cryptocurrencies, but the term is a contradiction. You either have a currency, with all its functions and a public guarantee, or private crypto-assets. But there is no such thing as a cryptocurrency. 3/ A European mobilisation on private payment infrastructures thanks notably to the involvement of the major European banks in the European payments infrastructure (EPI) project. It is crucial that we go beyond the current national systems, and offer cross-border solutions together with a pan-European brand. There is no contradiction between the CBDC and the EPI. We could very probably need both.

The BIS recently underlined this complementarity between public and commercial money in its report published on Friday. I would therefore like us to build a public/private partnership. The potential impacts on the banking industry and financial stability could be controlled using different means: for example, by having the retail central bank digital currency distributed by the banks, directly to individuals; and by limiting the amount of digital euro in circulation to prevent an excessive conversion of deposited commercial bank money into CBDC. ** In conclusion, I would like to repeat a conviction: Fintechs are no longer separate from the world of finance. They are transforming the practices of financial institutions, their relations with customers – we can see it clearly with payments – as well as their relations with supervisory authorities: new technologies are useful not only for improving crisis prevention and management, but also for optimising the work of the supervisor. We are talking about Regtech and Suptech. All these dimensions will be taken into account in the Banque de France’s next strategic plan, “Building 2024 together”. Thank you for your attention. 3/3  BIS central bankers' speeches
‘OECD median’ is the median change in inactivity across 38 OECD countries. It’s not clear what is driving this participation puzzle[3]. But whatever is behind it, low participation is a key component of the tightness in the UK labour market. Employment growth has slowed but unemployment has fallen to 3.6% - the lowest rate since 1974 - the number of vacancies also remain close to record highs and the redundancy rate remains close to its record low. Moreover, regular pay growth in the private sector has continued to rise to 6% in July 2022. The decline in participation is another negative supply shock which is at present impacting on an already tight labour market and adding to the upward pressure on nominal wages. The MPC has made successive revisions to our assessment, each time forecasting the labour market will stay tighter for longer. This tightness has been a key consideration in my MPC votes over the last year[4]. Models estimated by Bank staff indicate that the pickup in underlying private sector pay growth so far has been driven not just by the tightening labour market but also the rise in short term inflation expectations (Chart 3). While the latter probably reflects higher headline inflation itself, a point I will come back to, these factors are expected to push up pay growth in the near term. This would be consistent with the message of the latest surveys by the Bank’s Agents which suggest pay growth will strengthen further.

For the duration of the Guarantee this should reduce the risk that a long period of externally generated inflation leads to more persistent domestic price and wage pressures, although the MPC agreed that risk remained material. At the September MPC we also noted further signs of continuing strength of domestically generated inflation, that the labour market remains tight and domestic costs and price pressures including from businesses are elevated. Against that backdrop our initial assessment of the demand impact of the Energy Price Guarantee was that household spending was likely to be less weak than projected in the August report over the first two years of the forecast, and all else equal, relative to that forecast, it would add to inflationary pressures in the medium term. Since summer 2021, I’ve been highlighting my concerns about the build-up of inflationary risks[7]. A key consideration in my assessment of the risks that above target inflation persists is what happens to inflation expectations. I have already described how short term inflation expectations may be impacting on the immediate outlook for earnings. These could in turn feed through into prices given the high share of wages in costs, particularly in the services sector. And the same could happen if the current inflationary environment companies attempt to protect or increase their margins. Because shorter term measures of inflation expectations tend to move with actual inflation policymakers tend to focus on longer term measures.
But a lot has happened since then, which has accelerated the process of both rate increases and QT in many places. 16 See the Federal Reserve (2022a) for information on the latest statement and the Federal Reserve Bank of St Louis (2019) for a description of monetary policy in the years prior to the coronavirus crisis. 17 See Bank of England (2021). 18 See Bank of England (2022). 19 The ECB has not yet raised its policy rate, but has announced that it intends to start the reinvestment phase of its general asset programme, known as the APP, in the third quarter of this year The policy rate can be raised some time later and reinvestments are planned to continue for a long period after the first increase in the policy rate. See ECB (2022). 7 [19]  is that the holding will gradually decline in the future, and we decided the purchase sum for bonds would be half as much during the second half of the year as the first half of the year. Depending on the Executive Board's future decisions, the holding is expected to decline as securities mature. This means that our reinvestment phase lasts about six months, and that we raised the policy rate approximately in the middle of that phase. Table 2 compares the effects on the economy of raising the policy rate compared to using QT. Increases in policy rates have more direct effects on the economy and dampen inflation more.

Inflation is predicted to fall back to the target around the middle of next year, although this will depend on exchange rate developments. 6  BIS central bankers’ speeches  The second relates to deleveraging, or reduction of debt levels. Public and private debt levels are on a declining path, as can be seen from Figure 8. In the case of businesses in particular, a significant part of this takes the form of debt restructuring and write-downs. That, along with the resolution process of the failed banks, will reduce Iceland’s net external debt to a sustainable level over time (see Figure 9). This is a good thing, of course, but the deleveraging process has two short- to medium-term side effects that must be managed. The first one relates the negative effect of deleveraging on domestic demand. The second relates to its negative effect on the exchange rate, as economic entities with foreign debt, little or no foreign-currency income, and no access to foreign credit are forced to repay foreign debt faster than is optimal for them and the economy. This is part of our balance of payments problem. BIS central bankers’ speeches  7  That brings me to the third challenge, which is to break out of Iceland’s balance of payments crisis and lift the capital controls. Through fiscal consolidation and reinforcement of its FX reserves (see Figure 10a), Iceland has seen a steep drop in the perceived risk of the sovereign as reflected in CDS spreads.
6 Although the FOMC continues to direct the Desk to undertake OMOs as necessary to maintain conditions in reserve markets consistent with federal funds trading in a range from zero to ¼ percent, the Desk has not needed to conduct OMOs to manage the supply of reserves since December 2008. Instead, OMOs have focused on directives to adjust the size and composition of the SOMA portfolio. Since late 2008, the FOMC has directed the Desk to carry out three large-scale asset purchase programs and several other portfolio-oriented initiatives, such as the maturity extension program (MEP) and changes in reinvestment policies (Figure 3). Under the MEP, commonly referred to by market participants as “Operation Twist,” the FOMC lengthened the maturity profile of the SOMA’s portfolio of Treasury securities by offsetting purchases of longer-term Treasury securities with sales of equal par amounts of shorter-term securities and redemptions of maturing ones. 7 Additionally, since mid-2010, the FOMC has directed the Desk to reinvest or roll over payments of principal on the securities holdings in the SOMA,  4  These asset purchases followed various programs the Fed initiated during the crisis to support the liquidity of financial institutions and foster improved conditions in financial markets. Credit extension through these crisisrelated programs was temporary in nature, so the impact of these programs on reserve balances was unwound as the loans were repaid.

In contrast, reserve expansion associated with LSAPs has a more enduring effect as long as the assets remain in the SOMA portfolio, subject to offsetting influences on reserves from changes in other balance sheet items. 5  The authority for the Federal Reserve to pay interest on reserve balances held by depository institutions was granted by Congress prior to the crisis, in the Financial Services Regulatory Relief Act of 2006, with a planned effective date of October 2011. However, implementation was accelerated as part of the response to the financial crisis. The statute authorizes Federal Reserve Banks to pay interest on balances maintained to satisfy reserve balance requirements (required reserves) and on excess balances (excess reserves). 6  As noted earlier, the Board of Governors is responsible for setting the rate of interest on reserves. Since December 16, 2008, the interest rates on required reserve balances and excess reserve balances have both been ¼ percent, but the rates need not be the same. Although the interest rate on reserves represents an overnight rate, it is calculated and paid out on a lagged basis according to two-week reserves management maintenance periods. The payment is based on daily account balances and a weighted average of applicable overnight rates over the maintenance period. More information can be found in Regulation D.  7  The MEP provided additional monetary policy accommodation by increasing the duration of the SOMA portfolio, but unlike LSAP programs, on net it had a neutral effect on the level of reserves.
Gertler and Kiyotaki (2009), Gertler and Karadi (2011), Queralto, Gertler and Karadi (2012) are recent examples of this work stream with empirical applications as in del Negro, Eggertsson, Ferrero, and Kiyotaki (2010). 10  A thorough understanding of the generation and provision of liquidity by the private sector’s own means is still at the stage of infancy. First promising conceptual frameworks appear to emerge. Important work has been made by Adrian and Shin (2010) on “Financial intermediaries and monetary economics” and a promising example of theories for liquidity is “The I Theory of Money” by Brunnermeier and Sannikov (2011). 11  O. Issing, Central Banks – Paradise Lost, CFS Working paper No. 2012/06. 8  BIS central bankers’ speeches  The new normal requires a new communication policy of central banks (in the past it was not always clear that central banking and communication should be mentioned in the same sentence). The crisis was a game-changer in the communication of central banks: We now are faced with the potentially explosive interplay between markets and politics, we have to actively communicate with a broader public, we have to face up to the public and market discourse. We must argue with counterfactuals and navigate the short-term versus the long-term. To sum our new communication strategy up: We have to listen, explain and convince. Given the complexities of today’s financial markets, a deeper and more detailed financial market analysis is an important contribution to the conduct of monetary policy in the pursuit of maintaining price stability.

5  1  An additional element has been exchange rate targeting which was based on an external anchor. Effectively, this represents an intermediate objective if domestic credibility of the central bank may be weak. 2  See Greenspan (2002), Blinder (2005), Mishkin (2007) and Bean, Paustian, Penalver, and Taylor (2010), “Monetary Policy after the Fall”, Federal Reserve Bank of Kansas City Annual Conference, Jackson Hole, Wyoming, August. 3  See the discussion in Christiano, Ilut, Motto, and Rostagno (2010) on “Monetary policy and Stock Market Booms.”  4  See “A Monetary Policy Strategy in Good and Bad Times: Lessons from the Recent Past” Fahr, Motto, Rostagno, Smets and Tristani, ECB Working Paper Series No. 1336, May 2011. 5  See the evidence in Fischer, Lenza, Pill and Reichlin (2008): “Money and monetary policy – the ECB experience 1999–2006” and Trichet (2008): “Risk and the Macro-economy”, Keynote address at the conference “The ECB and its watchers X”. 2  BIS central bankers’ speeches  Nonetheless, I think it is fair to say that nobody – including central bankers – has expected a crisis of the dimension that we have been experiencing since five years. 6 The overall favourable macroeconomic constellation from the Great Moderation, with low volatility and robust growth, has certainly induced some benign neglect – also on the policy side.