samchain/econo-pairs-v1 huggingface dataset:
When we begin to normalize monetary policy, will we provoke another “taper tantrum,” or will market participants be relaxed as was the case when we actually tapered the rate of our asset purchases in 2014? If financial conditions were to tighten more than expected when we began to normalize monetary policy, then I suspect we would go more slowly. In contrast, if financial conditions did not respond at all, or eased, then I suspect we would go more quickly, all else equal. Also, I don’t think there is a particular set of financial conditions that we should target. After all, the linkage between financial conditions and the economy is variable and the economic outlook is influenced by much more than financial conditions. Thus, I have no target in mind for the U.S. equity market or other indicators of financial conditions. But I do care about how financial conditions evolve when the changes are sufficiently large or persistent enough so they are likely to influence the economic outlook. In that case, financial conditions need to be taken into consideration in the design and conduct of monetary policy. It has been a pleasure to speak here today. I hope my comments have made it clear that the monetary policy decision-making process is difficult when the margins of excess capacity narrow, but inflation remains below our objectives. The world is highly complex and there is much we don’t know about how the economy will evolve in the future.

First, the decline in these forward inflation compensation measures has been highly correlated with the fall in oil prices – a pattern that is hard to explain. Second, a careful analysis of the factors behind the decline in inflation compensation suggests that changes in liquidity risk premia and what investors are willing to pay for inflation protection account for most of the decline, rather than the decline reflecting a change in inflation expectations. Still, we need to continue to monitor inflation compensation closely, while recognizing that sorting out the allocation of the decline in inflation compensation across the three factors – liquidity risk premia, the price for inflation protection and inflation expectations – is admittedly difficult. And also, the conclusions reached in such models are sensitive to these models’ assumptions and structures. Regardless of how much signal one takes from these recent data, a decline in inflation expectations below levels consistent with our 2 percent inflation objective would be problematic because inflation expectations are an important influence on actual inflation. Businesses, for example, make decisions about the size of annual wage increases based, in part, on their expectations of future inflation. And, households base their spending decisions, in part, on how fast they expect their incomes to rise, and inflation expectations play a role in that process. Lower inflation expectations also raise the level of real interest rates, all else equal, which can undercut the power of monetary policy to support economic activity. This is particularly relevant at the zero lower bound for interest rates.
Davíð Oddsson: The Central Bank of Iceland’s commitment to price stability Speech by Mr Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, at a seminar organised by the Iceland Chamber of Commerce, Reykjavik, 5 December 2005. *  *  *  On December 2, 2005 the Central Bank of Iceland raised its policy interest rate by 0.25 percentage points before last weekend. I do not expect that decision came as a surprise. Some people may well have read into what the Bank wrote in connection with the policy rate hike in September that the increase this time would be greater, by 0.50 or even 0.75 percentage points. No such decisions were embodied in those writings, although the Bank made a clear commitment that it takes its mandatory role seriously and would not flinch at following it with full force. Those declarations stand firm. Monetary Bulletin, which was published on the Central Bank’s website last Friday, includes a detailed account of the Bank’s assessment of economic and monetary developments and prospects, and the arguments underpinning its decision to raise the policy interest rate now. The scenario that we faced on September 27 has changed in several ways. Uncertainty about wage settlements has been dispelled, although admittedly at considerable cost. The consumer price index fell somewhat at the last measurement. House price inflation has slowed down and there are signs that a turning point has been reached.

Global investments have suffered from weakening business confidence. In Q1 this year, G3 investment growth moderated to 3.4% on a year-on-year basis, from 3.7% last year. In the ASEAN-4 economies, year-on-year growth in fixed investment spending has pulled back sharply, to 3.1% in Q1 this year. This is half the pace seen in 2018. There are three factors driving the current weakness in manufacturing, trade, and investment. a downturn in the global electronics cycle; the lagged effects of deleveraging in China; and the trade conflict between the US and China. 1 / 11  BIS central bankers' speeches  Of the three factors, the trade conflict poses the biggest risk to global growth outcomes. Cycles in electronics production are a common feature and structural trends in digitalisation and the Internet-of-Things should support a recovery eventually in chip production in the next few years. As for deleveraging in China, there has clearly been an easing of the policy stance in recent months in response to the slowing economy. If the trade impasse between the US and China drags on and further tariff measures are imposed, growth in the second half of 2019 is likely to be weaker than earlier envisaged. MAS’ estimates suggest that the direct impact of the tariffs that have been introduced to-date would already shave off a cumulative 0.3% points from global GDP growth over 2019– 2020. The indirect effects on business and consumer sentiments and financial markets are difficult to estimate.
Finally, as the United States has broken the nuclear agreement with Iran, there might be further tensions on the oil market, with adverse effects on world growth. In the current setting these risks are relevant to the Spanish economy, given that it still has high levels of public and external debt, which make it particularly vulnerable to negative developments on the international capital markets. At the same time, further increases in oil prices might particularly affect our economy in view of its high foreign energy dependence. Elsewhere, the political situation in Catalonia does not appear to have stabilised, thereby posing a further factor of uncertainty, with potentially adverse consequences for the Spanish economy as a whole. In the medium term, the expansion of our economy should cease to rest on the expansionary impulses of demand-side policies and come to depend on more durable factors. The estimates available on potential growth are relatively modest, meaning it is crucial to attempt to address some of the problems restricting it. These include most notably high structural unemployment, population ageing, a poor productivity trend and the technological capital deficit. Budgetary policy in 2018 I shall now discuss the main items of the draft State Budget for 2018 approved by the Government on 27 March, and complemented by the Stability Programme Update for the period 2018-2021, submitted to the European authorities on 30 April. This second document already includes some of the measures added to the draft Budget in its passage through Parliament.

The management of the Global financial crisis and its aftermath in the advanced economies have highlighted the importance of this aspect of leadership. How then do we unleash and harness the leadership energy to perform and be effective in this new and more challenging environment. It lies in self-hacking the mind and the heart. We can draw inspiration from the brain-training secrets of the Olympic athletes which start with oneself and the ability to tap into our internal reservoir of strength. Just like athletes, one can tap into this impressive mental prowess to train the mind to remain focussed eliminate distractions, reduce stress and anxiety and build the stamina needed to achieve optimal performance. In the business of Central Banking – a business that I have described as being “an unfinished business” because there are always new challenges on the horizon, endless demands emerging in an ever changing and more complex environment and great  BIS central bankers’ speeches  1  expectations that the Central Bank will provide the solutions and the necessary actions to resolve the monetary, financial and economic problems that continue to confront our world. In conditions of financial and economic crisis, a phenomenon that has now become more frequent, in which Central Banks are at the forefront in its management. The drive to deliver in the face of great odds from my experience has been about having great focus on the results and goals to be achieved and a strong conviction of how this might be pursued.
The uncertainty looking forward relates primarily to the prospects for a recovery of investment spending as we move into the second half of the year. Most economic analysts - including ourselves in the Bank - are reasonably optimistic, pointing in particular to the continuing underlying strength of US productivity growth despite the economic slowdown and evidence that demand for computer hardware has picked up. The consensus economic forecast is for overall growth in the US - perhaps after something of a lull in the second quarter - to pick up steadily to around trend - to 3% or perhaps somewhat more - through the second half of the year into next. But it has to be said that many US businesses themselves seem less convinced about future earnings prospects; and financial markets, too, remain uncertain, notably about equity valuations - partly as a result of the recent spate of corporate governance and accounting failures. The outcome in the US, of course, is fundamentally important to the prospects elsewhere. But on the reasonably optimistic consensus view for the US, the outlook is for recovery to around trend growth in the eurozone and for modest positive growth even in Japan. And there are encouraging signs of stronger growth elsewhere in Asia - though parts of South America have problems of their own. If global economic recovery seems likely to provide a more hospitable international environment for our own economy, so, too, do recent developments in foreign exchange markets.

It is perhaps not surprising that as they have become more acclimatised to a low inflation/low nominal interest rate environment, households have been prepared to incur more debt relative to incomes, and the debt to income ratio has indeed risen to an all-time high over recent years. But that adjustment cannot go on indefinitely and will at some point come to an end. In the meantime many commentators have recently focussed on accelerating house price inflation which is closely related to the build-up of debt - as worrying evidence of a bubble that will eventually burst. And we, on the MPC, agree that the current rate of house price increases is unsustainable, although it is less obvious that that necessarily applies also to the present level of house prices, though of course it may. In any event, while, of course, we pay close attention to what is happening to house prices, as we do to other asset prices, our principal concern, in this part of the equation, is with consumer demand as a whole - and that depends on a range of other factors, not just on house prices. What is clear is that if external demand does improve as we expect, and if consumer demand growth does not moderate to accommodate it, then we will need at some point to raise interest rates to bring that moderation about. It is important that both borrowers and lenders should understand and take account of that possibility in their decision-making. But you will note the qualifications.
And this requires an investment in risk management and controls commensurate with the increasing complexity of these challenges, and it requires a cushion of capital and liquidity large enough to capture the potential risk of losses in a less favorable macroeconomic environment. The increase in the flexibility and resilience of the U.S. economy over the past two decades has a lot to do with the increased openness of the U.S. economy. And sustaining this flexibility, which is so important to our capacity to adjust to shocks, requires that we continue to support the process of openness and economic integration. We jeopardize future income gains if we are unable to sustain support in the United States for what has been a relatively open trade policy. How effective we are in meeting this political challenge is likely to depend significantly on how effective we are in improving educational opportunity and achievement in this country, and perhaps also in improving the design of the temporary assistance we provide individuals who bear the brunt of the adjustment costs than come with greater global economic integration. These policies by the United States would help improve the prospects of a more benign adjustment process. But they would not be sufficient to produce a more favorable adjustment path. A more favorable adjustment scenario would require a complex mix of policies and action in each of the major economic areas, sustained over a considerable period of time.

2  BIS central bankers’ speeches  In addition, none of these sectors is unregulated today in Europe (AIFM directive for alternative funds, UCITS directives for funds, Solvency 2 for insurance, EMIR for CCPs) and replicating some rules stemming from banking supervision to these entities would simply be irrelevant. More generally, it is up to the policy makers to act consistently and try to anticipate and mitigate any possible unintended effects of their policy decisions. For instance it might seem contradictory to encourage central clearing of derivatives or trading on organized trading platform as a means to reduce systemic risks on the one hand, while on the other hand levying a Financial Transaction Tax on these operations if they are deemed safer. Policy makers should make sure their actions will not be a factor of market instability which could spread to the market and create another crisis. Conclusion As we can see, policy makers have still a lot of work on their plate as regards the design of an adequate regulatory framework for the “shadow banking sector” and for it to be sufficiently sound to be providing a sustainable “market based financing”. The Capital Market Union’s project launched by the European Commission is aiming at achieving to achieve a sound regulatory framework. To this end, for instance, the European Commission with the help of the European Banking Association (EBA) has recently defined criteria for Simple, Transparent and Standardized (STS) securitization.
However, today, the standard to risk management has become more rigorous and technical, with risk being categorized into credit risk, market risk, liquidity risk, interest rate risk, operational risk, and reputational risk, each with their specific risk management process set out in detail, which can all seem quite complicated and somewhat of a headache at time! The standard for managing some risks could demand the use of complex quantitative technique, which can at time be quite incomprehensible, and make directors feel uncomfortable in discharging their role, and uncertain as to how deep they must dwell into the technical aspect. Let me offer my take on how to respond to this issue, to try and help clarify the task facing the directors. First and foremost, banks need to set up a Risk Management Committee to assist the Board’s in its oversight. The members of the Committee may be drawn from the Board only, or a combination of Board and management. The important thing is that members of the Committee must be well versed in modern risk management, someone the Board trust and have confidence, and report regularly to the Board in line with the agreed work process. The practice in some banks is to form the Risk Management Committee from members drawn from the Board and also senior management responsible for various risk areas, and the post of the Chair of the Committee is given to a Board director who will act as eyes and ears for the Board on these issues.

The centrepiece of the supervision of significant banks will be the Joint Supervisory Teams, responsible for the day-to-day oversight of these banks. These teams will be made up of specialists from the ECB and from the national authorities, under the leadership of a coordinator designated by the ECB, and a sub-coordinator designated by the national supervisor. Approximately 75% of those making up the teams will be drawn from and designated by the national supervisors; in the case of Spanish banks, it will of course be staff from the Banco de España. Inspection visits to significant banks, what is known as on-site inspection, will continue to be conducted by the national authorities, and their results will be passed onto the ECB for the adoption of the appropriate measures. With regard to the less significant banks, national authorities will continue to directly supervise them as they have to date. Over 3,600 banks across the euro area are involved here. The ECB will define common practices and criteria, it will monitor the actions and position of these banks and it will always be entitled, if it considers it necessary, to re-claim direct supervision over any of these banks. 2  BIS central bankers’ speeches  The competences and responsibilities of the Banco de España in the framework of the new Mechanism I would now like to address the competences and responsibilities of the Banco de España, as a national supervisor, under the new Mechanism.
Investment strategy, governance and organisation must continue to evolve in tandem The sceptics who 20 years ago doubted the decision to give Norges Bank task of managing the oil fund have not been proven right so far. In the National Budget for 2018, the Ministry of Finance states that the Bank has managed and continues to manage the fund in a sound manner. Norges Bank believes that the Bank is well positioned to manage the GPFG and perform central banking tasks in a sound manner also in the future. If the fund remains under the aegis of the Bank, Norges Bank recognises that there are arguments for establishing a separate committee for monetary policy and financial stability. Such a committee will substantially unburden the board of central banking matters, and the composition of the board can then be tailored more closely to specific tasks relating to investment management. In this case, the Executive Board favours a 4/7  BIS central bankers' speeches  model that is based on the current governance structure. Norges Bank also recognises that there are aspects of the current organisation and governance that could be reconsidered. The organisation, governance structure and supervision must be considered in the light of new challenges for the management of the fund and for central banking. In recent years, changes in the Ministry’s mandate have given the Bank greater responsibility for formulating parts of the GPFG’s investment strategy.

And why, for countries where there have been larger and faster increases in household debt levels, recessions have tended to be deeper still. The Financial Policy Committee has already acted in response to the growing momentum in the housing market. As well as the general strengthening of bank capital, the FPC, in conjunction with other regulators and the Treasury, withdrew both the cheap funding and favourable capital treatment of mortgage lending introduced after the crisis to help support the housing market. And, we have asked the FCA that when lenders test whether prospective borrowers can afford, through time, the mortgages they seek they should bear in mind future Financial Policy Committee recommendation on the appropriate interest rate stress test to use in assessments of affordability. Whether and how to act further if, following the pause of the last couple of months, momentum continues to build will be the most challenging judgment the FPC will have to take in the coming months. The FPC’s response will depend on the nature of the risks to stability identified. The FPC’s powers of direction in relation to the capital banks and building societies bear most directly on mortgage lenders’ ability to weather a downturn and housing bust once it has emerged. Others, like the FPC’s powers to make comply or explain recommendations to the PRA and FCA could bear more directly on the crucial underwriting standards and affordability constraints like debt service to income, loan to income and loan to value.
year  -0,5  0,0  vs. 15 July  Chile: Nominal interest rates (percent) 6,5  6,5  6,0  6,0  5,5  5,5  5,0  5,0  4,5  4,5  4,0  4,0  jun.11 Jun.11  BCP-2  ago.11 Aug.11  BCP-5  oct.11 Oct.11  BCP-10  (1) Change in nominal interest rates of 10-yr generic bonds, unless otherwise stated. Changes at 18 October 2011. (2) 10-yr BCP rates calculated by the Central Bank of Chile. Variations at 17 October 2011. (3) 15-yr generic bond rates. Sources: Central Bank of Chile and Bloomberg. 14  BIS central bankers’ speeches

The International Financial Corporation (IFC) – an institution member of the World Bank Group that Romania joined in 1991 – has supported the Romanian banking sector by investing in various Romanian banks, especially during the privatization process. I welcome the current involvement of the World Bank in projects that aim to improve the health and education sectors, to reduce poverty, as well as projects focused on climate issues. Lastly, I thank you for the invitation to take part in this event. I am honored to be here, celebrating 30 years of renewed partnership and cooperation between Romania and the World Bank. To the team in Bucharest Office of the World Bank – which I considered, during these 30 years, as being competent and dedicated, aligned with our endeavors – I extend my warmest congratulations. Happy anniversary! At the same time, I would like to take the opportunity to express my appreciation for the management and staff of the World Bank in Washington for their work in pursuing the Bank's mission to foster sustainable development and promote social prosperity around the world. Thank you for your attention! 2/2  BIS - Central bankers' speeches