samchain/econo-pairs-v1 huggingface dataset:
In particular, in its new strategic framework the Federal Reserve affirms that in response to periods when inflation has been running persistently below 2%, it will aim to keep inflation moderately above 2% for some time.14 This asymmetry in the Federal Reserve’s response to the undershooting of the average inflation target (with a relatively stronger expansionary response) as opposed to overshooting (which the Federal Reserve promises to tolerate temporarily) is an attempt to address precisely the credibility problems referred to above. In January 2020 the ECB announced the launch of its monetary policy strategy review. The outbreak of COVID-19 has delayed this process, which is now expected to be concluded later this year. Given that this process is ongoing, the conclusions are as yet unknown. However, I can say that that the outcome is open; both the ECB and the Eurosystem’s national central banks are conducting a great deal of analysis and are seeking the opinions of civil society, academic economists and other professional and social groups. The ECB’s strategy review is very ambitious; not only does it analyse matters such as possibly adopting strategies involving making up for past deviations of inflation from its target, but it also addresses additional topics such as the design and optimal use of the various monetary policy tools; the measurement of inflation; the interactions between monetary policy and macroprudential policy; the institution’s communication policy; and the impact of climate change, digitalisation and globalisation on monetary policy.

03.03.2021  The European Central Bank’s monetary policy: response to the pandemic crisis and future challenges* Universidad Autónoma de Madrid Pablo Hernández de Cos Governor of the Banco de España  *English translation of the Spanish original  Distinguished Rector, fellows, ladies and gentlemen, good morning: It is a great pleasure for me to be able to participate in this event organised by the Universidad Autónoma de Madrid. First, I would like to take this opportunity to share with you some thoughts on the role that the European Central Bank's (ECB) monetary policy has played in response to the COVID19 pandemic in the past year, helping to stave off some of the more serious consequences, at least from the economic standpoint, of the different waves of the disease in Europe. Second, I shall give a brief overview of current economic developments in the euro area and the role that monetary policy could play over the coming quarters. In the third part of my speech, I would also like to reflect on some of the medium and longterm challenges for monetary policy in advanced economies, which have prompted the main central banks, among them the ECB, to launch a review of their monetary policy strategy. ECB monetary policy measures in response to the pandemic The outbreak of COVID-19 in Europe in late February and early March 2020 triggered an unparalleled economic shock which required an urgent and decisive economic policy response to prevent the effects of the crisis from becoming permanent.
In this trajectory, core inflation – the CPIEFE – will be less than 4 percent towards the fourth quarter, and the more volatile prices not included in the CPIEFE – mainly foodstuffs – should help headline inflation to converge to 3 percent slightly faster than we expected in December. In the latter part of 2015, we raised the monetary policy rate (MPR) twice, bringing it to 3.5 percent. After that, we communicated that additional adjustments were still required, which would be made at a measured pace. Accordingly, we held the MPR unchanged in our meetings of January, February and March. Now let me get in more detail into the macroeconomic scenario we believe to be the most likely for the coming quarters, and associated risks. Macroeconomic scenario The main developments of recent months show that in the latter part of last year the economy grew less than anticipated. A fall in mining activity, which we had already seen in previous quarters, was compounded with slower growth in sectors unrelated with natural resources. In particular, those linked to services. Domestic demand also grew less than estimated and is expected to remain weak. The slowdown in its private consumption and investment components stood out (figure 1). Another important development of recent months came from abroad. Mainly, because the external impulse that the Chilean economy will face in 2016 and 2017 will be lower than we expected in December.

In this context, the Central Bank has applied an expansionary monetary policy that is actually one of the most expansionary among comparable economies. Likewise, in the past few years we have made substantial revisions to our estimates of the Chilean economy’s potential growth. This is important, because a good diagnosis of mediumterm inflationary pressures requires a good measurement of the country’s capacity for growth. As we have explained before, the depreciation of our currency triggered an increase in tradable goods inflation. We expected this, since it is a well-established fact that in Chile, as in other emerging economies, the pass-through coefficient of the exchange rate to prices is BIS central bankers’ speeches  5  high. And not only did we expect it but we also hoped for it, as it is the way to generate the necessary change in relative prices when indexation renders the prices of nontradables relatively sticky on the downward side. In this context, it is important to understand that in our policy framework the main objective is to ensure that inflation will converge to the target within the policy horizon, which is usually two years. Of course this does not mean that we will overlook current inflation, but that we can tolerate deviations of inflation in the short term as long as we are convinced that such convergence within the above mentioned horizon is not at risk.
The Governing Council is constantly and carefully monitoring all developments and stands ready to do all that is necessary to maintain price stability. Later today, Jürgen Stark will present the outcome of our enhanced monetary analysis that enlarges our toolkit to pursue this aim. Beyond our role as guardians of the euro, we also have to deliver on our responsibilities as part of European and global economic governance. In this context, I would like to touch on the work programme of the Van Rompuy Task Force, which was established by the European Council in March 2010 and in which I am participating. Vítor Constâncio and Lorenzo Bini Smaghi will go into greater detail, and I will highlight a few elements of the task ahead. BIS Review 97/2010  5  First, national fiscal reforms – to which I alluded before – need to find an anchor and a collective guarantee in renewed and strengthened institutions for multilateral budgetary surveillance. National fiscal frameworks will receive a blueprint of good practice, which will ensure that commitments to fiscal prudence are internalised first and foremost in the national Parliaments. A new code for statistical reporting will support the legislatures in enforcing their fiscal plans. This will be the first line of defence against the accumulation of fiscal imbalances. We will have a second line of defence at the level of the EU27, and in particular within the euro area.

Euro area real GDP increased by 0.3%, quarter on quarter, in the third quarter of 2016, after recording a similar pace of growth in the second quarter. Incoming data, notably survey results, point to somewhat stronger growth in the last quarter of 2016. Looking ahead, we expect the economic expansion to firm further. The pass-through of our monetary policy measures is supporting domestic demand and facilitating the ongoing deleveraging process. The very favourable financing conditions and improvements in corporate profitability continue to promote the recovery in investment. Moreover, sustained employment gains, which are also benefiting from past structural reforms, provide support for private consumption via increases in households’ real disposable income. At the same time, there are signs of a somewhat stronger global recovery. However, economic growth in the euro area is expected to be dampened by a sluggish pace of implementation of structural reforms and remaining balance sheet adjustments in a number of sectors. The risks surrounding the euro area growth outlook remain tilted to the downside and 1/2  BIS central bankers' speeches  relate predominantly to global factors. According to Eurostat, euro area annual HICP inflation increased markedly from 0.6% in November 2016 to 1.1% in December. This reflected mainly a strong increase in annual energy inflation, while there are no signs yet of a convincing upward trend in underlying inflation.
Its location, however, also depends on the spread, S, with the boom phase of the credit cycle leading IS to shift outwards and the bust phase shifting IS inwards. To complete the story, we just need to add a description of monetary policy. Assuming inflation starts off at target, an inflation targeting central bank will seek to hold the level of demand at potential, so monetary policy is described by MP. In the face of a credit boom, the central bank would then raise the interest rate to negate the expansionary effect on demand, and cut it in the face of a credit bust. The corresponding aggregate demand schedule, incorporating the endogenous policy response, is given by AD in the right-hand panel, together with a conventional upward-sloping aggregate supply schedule, AS; for simplicity, I ignore the possible impact on the supply of goods of changes in the price and availability of credit. A central implication of this analysis is that while it suffices to think in terms of a single representative interest rate in normal conditions, in times of stress the whole set of market rates need to be considered. Consequently, movements in the policy rate alone no longer provide an accurate summary measure of monetary conditions. The importance of this is illustrated in Chart 8, which shows the recent paths of the policy rate in the United States and the United Kingdom, together with representative measures of the cost of bank debt and the  BIS central bankers’ speeches  5  corporate loan rate5.

Moreover, restricting domestic credit expansion will not serve if the cross-border activities of banks result in their most vulnerable exposures originating overseas. That, of course, was the case in the present crisis, where the main losses to UK and European banks arose from holdings of securities linked to the behaviour of the US housing market. On top of that, a unilateral increase in interest rates may well end up having a perverse effect on credit growth, because it sucks in capital flows from abroad to take advantage of the interest differential, so boosting the real exchange rate and adding to the supply of funding to the banking sector. The obvious conclusion is that one needs to look to other instruments – so-called macroprudential regulation – which act directly against the expansion in credit during the upswing and limit the contraction in any bust; in other words they stabilise the supply of intermediation schedule, XS. Given our earlier discussion, an obvious way to do this is by raising capital requirements on banks, thus improving their resilience, during the upswing of the credit cycle and reducing them during the subsequent downswing, allowing banks to maintain the supply of financial services. The new Basel III agreement on capital and liquidity regulation makes specific provision for such a countercyclical capital buffer of up to 2.5% of risk-weighted assets on top of the increased base Core Tier 1 capital ratio of 7%, i.e. a potential increase in capital requirements of more than a third.
This has widened output gaps and depressed inflation. In response, policymakers have provided unprecedented degrees of policy support – in a number of advanced economies, double-digit percentages of GDP in both Quantitative Easing (QE) and fiscal stimulus. These actions should stimulate activity, shrink output gaps and boost inflation. Chart 1: CPI inflation projection  Source: Bank of England. Notes: Projection from February 2021 Monetary Policy Report, based on market interest rate expectations, other policies as announced. 1  For example, Batini and Haldane (1999). 2  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  2  It is these heavy weights on either end of the inflationary see-saw which give rise to unusually large uncertainties around future inflation. If the hit to activity were to prove larger or longer, even this degree of policy stimulus may prove insufficient to return inflation to target. But if economies bounce-back as the vaccination programme is rolled-out, policy stimulus could over-stimulate the economy and, with it, inflation. There are few, if any, historical precedents to help judge the response of the economy to this scale of shock and degree of policy stimulus. And the costs of getting these judgements wrong could be significant. Costs for the economy, if policy is set either too tight (resulting in lost jobs and income) or too loose (resulting in policy needing to be tightened more than expected, causing future losses of jobs and incomes). And costs for central banks in damaged credibility, if inflation targets were to be missed persistently.

Nonetheless, whether these judgements on the output gap come to pass depends, ultimately, on the pace at which demand in the economy returns and the accompanying response of the economy’s supply potential. Let me discuss those two issues in turn. 14  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  14  Chart 12: Output gap – Global Financial and Covid Crises Compared  per cent  1 0 -1 -2 -3 -4 -5  t=0  t+5  t+10  t+15  Quarters GFC  Covid  (forecast)  Source: Bank of England. (b) Money and Money Spending I will discuss in some detail the components of private demand, consumption and investment, at a future event. But as after the global financial crisis, some useful insights into possible future paths for aggregate demand and aggregate money spending is provided by looking at developments in the banking system. Exceptional amounts of central bank money have once again been created during the Covid crisis to maintain borrowing costs at low levels. This additional QE is running at around $ ½ trillion so far and rising.15 Globally, the amount of QE undertaken during the crisis is already rapidly catching-up with the amount undertaken during the prior ten-year period. And in the UK, QE so far announced by the MPC, at £ billion, is already more than was carried out in the 10-year aftermath of the global financial crisis. 15  Based on Federal Reserve, ECB, Bank of England, Bank of Japan and Swiss National Bank.
Decisions were now taken by the Bank’s MPC and were accompanied both by published minutes of MPC meetings and a quarterly Inflation Report. This pushed the wordcount per decision up to around 20,000. Fast forward to today. Monetary policy decisions are still made by the MPC and communicated through Minutes and the Inflation Report. But there have been additions. A Monetary Policy Statement now accompanies every policy decision. And, after a lag of eight years, transcripts of the policy meetings themselves will in future also be published. By my rough estimates, that will push the word-count per monetary policy decision up to around 30,000 to 35,000. These are big steps forward from an openness perspective. The key question, from a Shannon perspective, is how far they have helped understanding of monetary policy by the general public. The evidence here is mixed. On the upside, around 60% of the general public believe the Bank has a good understanding of the economy. On the downside, despite the raft of transparency initiatives, only around a third believe the Bank operates with openness. And, perhaps most tellingly of all, only around a quarter believe the Bank explains its actions and decisions in terms they can understand. 63 What explains this mixed message? Perhaps, as with banks, some of the explanation lies in the nature of communications, rather than their quantity. Chart 4 puts Bank of England reports and speeches on the linguistic complexity map.

48 For a growing body of opinion, the short-term, shareholder-centric model of public companies is failing to satisfy the wider needs of society. 45  Handelsbanken 2016 Fact Book, available here. 46  Metro Bank news release, ‘Metro Bank brings the revolution to the King’s Road’, available here. 47  New City Agenda (2014). 48  For example, Mayer (2013), Haldane (2015), Lazonick (2014). BIS central bankers’ speeches  11  There is at least some evidence that companies themselves may be reaching the same conclusion, seeking out alternative models of governance than the public company. It is a striking, and troubling, fact that the number of companies quoted on London’s main stock exchange has roughly halved since 2000, while IPOs has fallen by around 50%. In the US, many of the fastest-growing companies, such as Google, eBay and Apple, either remain in private hands or have alternative share structures, such as dual-class listings. 49 Interestingly, re-examining this shareholder-centric model was one of the key recommendations of the PCBS back in 2013. I quote: “The Commission recommends that the Government consult on a proposal to amend section 172 of the Companies Act 2006 to remove shareholder primacy in respect of banks, requiring directors of banks to ensure the financial safety and soundness of the company ahead of the interests of its members.” Yet progress on that recommendation has, to date, been rather limited. Take an issue like executive pay.
When income growth is high, it is natural that some of the increased wealth will be reflected in a greater preference for leisure. It is nevertheless telling that the number of hours actually worked is considerably lower in Norway than among our main trading partners, despite very low unemployment in Norway. Generous transfer schemes and other aspects of our welfare system induce many to exit the labour force – wholly or partially. In recent years, the high level of labour immigration has compensated for this. Nonetheless, this situation does not seem sustainable. Reforms that provide stronger work incentives are needed and should be implemented in anticipation of an ageing population. The pension reform was an important step in the right direction. Chart 16: Productivity growth has declined What about the other factor that is crucial to growth? Mainland productivity increased markedly in the 1990s, partly owing to a number of structural reforms. The banking sector was rationalised after the crisis. The tax reform set the stage for profitable investments and business sector restructuring. Improved competitiveness and the development of the oil industry facilitated the rapid integration of new technology by firms. Productivity growth remained relatively high up to around 2005. But since then it has declined. The decline has been more pronounced than among our trading partners. BIS central bankers’ speeches  7  Chart 17: Growth in real capital Productivity is closely linked to capital stock per worker. Growth in real total fixed capital formation for mainland Norway fell during the financial crisis.

I want to emphasise that in all these key positions Andrew has shown a remarkable capacity to generate new ideas, foster consensus, fuse different views and encourage dialogue, and all this with a subtle sense of humour and extraordinary attention for the human touch. Let me add that during his term at the helm of both the BIS and the Financial Stability Forum, his steady hand has been behind the international financial system’s success in confronting the serious shocks arising in recent years. In the case of Otmar Issing, I have the pleasure of meeting him regularly in the Governing Council of the European Central Bank, where his illuminating presentations on economic developments in the euro area are pivotal in guiding our monetary policy decisions. You should know that Otmar, an academic of outstanding personal and professional integrity, is a truly remarkable and experienced central banker. For many years as Chief Economist of the Bundesbank and a Member of its Board, he contributed to enhancing the reputation of this institution as one of the most successful central banks in the world. When the European Central Bank was created in June 1998 he became its Chief Economist and a member of the Executive Board. Over what has been nearly five years he has been deeply involved in the fascinating tasks of putting in place and managing the single monetary policy. Otmar Issing’s contribution to these tasks has, in my view, been outstanding.
Muhammad bin Ibrahim: The polemics of governing law in Islamic finance – recent developments and the way forward Keynote address by Mr Muhammad bin Ibrahim, Deputy Governor of the Central Bank of Malaysia, at the International Shariah Research Academy for Islamic Finance–Institute of Islamic Banking and Insurance (ISRA-IIBI) 2nd Annual International Thematic Workshop 2010: “The Polemics of Governing Law in Islamic Finance”, London, 29 November 2010. *  *  *  Let me first thank the organizers for inviting me to speak at this ISRA-IIBI 2nd Annual International Thematic Workshop 2010. Although I very much regret not being able to be in London in person, I am thankful for the many advances of modern technology for the opportunity to briefly address all of you this morning. I am also happy to note that this event is a continuation of international collaboration between the organizers, the International Shariah Research Academy for Islamic Finance (ISRA), the Institute of Islamic Banking and Insurance (IIBI) and Thomson Reuters, following the success of the inaugural workshop held last year. The theme of this year’s workshop, “The Polemics of Governing Law in Islamic Finance: Recent Developments and the Way Forward”, is most apt. With the emergence of Islamic finance as a new growth area in the global financial landscape, this Workshop provides an excellent forum to exchange views and information on topical legal issues in Islamic finance.

There is nothing in our history that indicates that monetary policy, or any economic policy for that matter, has found its final form. But there is one certainty: keeping promises and creating confidence are fundamental both for monetary policy and more generally for growth and development. The man who built this house, Hans Rasmus Astrup, died in 1898, just before the housing market crash in Kristiania and the ensuing crisis. House prices plummeted by more than 50 per cent at that time and several banks collapsed in the next few years. The outfall of the  37  Woodford, Michael (2003): Interest and Prices, Princeton University Press. 38  Woodford (2003) points out that the central bank’s announced interest rate strategy can be adjusted as new information becomes available. However, in order to maintain confidence in the announced interest rate path and for it to be useful, the public must not have reason to expect systematic deviations. 10  BIS Review 136/2008  current crisis is hardly likely to be as dramatic. Prime Minister Jens Stoltenberg has stated that “the Norwegian authorities are prepared to implement necessary measures to secure confidence in the Norwegian banking system”. This is a promise that the government authorities both have the ability and will to fulfil. BIS Review 136/2008  11