samchain/econo-pairs-v1 huggingface dataset:
For each (approximate) decade for which the data on 80 sub-components of the retail prices index are available, the chart shows the relationship between the standard deviation of those relative prices and the inflation rate in each month. At low inflation rates, say up to 4% a year, it appears that it is the absolute value of changes in relative prices that is linked to the inflation rate. This would be the case, as in Britain recently, where changes in relative prices, whether up or down, were largely responsible for short-term fluctuations in the inflation rate around a relatively stable long run level. Variability in relative prices might lead inflation to be either above or below the inflation target, but not systematically in one direction or the other. Increases in house prices move the inflation rate up and falls in oil prices move it down. In both cases, an increase in the variability of relative prices leads to movements of inflation away from the target, but not in a systematic direction. But at higher rates of inflation (or deflation) the deviation of inflation from zero is positively correlated with the variability of relative prices. Hence, outside a range close to price stability, the higher the inflation rate, the greater is the variability of relative prices.

In the case of solvent institutions, we have known theoretically since Thornton (1802), and probably over a century, as a practical policy, how to deal with that vulnerability in a domestic setting: with central bank LOLR operations, later complemented by deposit insurance. In the current setting, it is far from guaranteed that this process can be replicated at the international level. Of course, in normal times and with developed capital markets, banks can use foreign exchange swap markets to convert domestic liquidity into foreign exchange liquidity speedily and relatively cheaply. However, this process broke down almost completely during the global run on cross-border non-US bank liabilities in the immediate aftermath of the Lehman collapse. In a situation like this, the home central bank’s ability to assist banks to acquire the foreign liquidity denied them on the market and thus avoid a failure of banks to deliver on their foreign currency payments is limited by the size of its reserves or the willingness of the central bank issuing the international currency in question to help. Although the provision of foreign currency liquidity through reserves was clearly important during the crisis, most studies seem to support the conclusion that the dollar swap lines made the crucial difference, especially when they were uncapped vis-à-vis some key central banks. To a significant degree, this was the domestic LOLR process replicated at the international level. Does this mean that we have the solution? At the conceptual level, yes, but at the practical level, maybe not.
His work will now feature on another 2 billion works of art – our new £ notes. How did we decide? How did we arrive at Turner? As befits Turner, we took the process of selecting a new banknote character out of the black box and brought it into the sunlight. In December 2013, the Bank of England committed to making our character selection process much more open and transparent. First, the Banknote Character Advisory Committee was created and then decided the field of accomplishment. They chose visual arts, which had never before been properly displayed on a banknote. The Bank then invited the public to make nominations in this field. They proposed artists, sculptors, printmakers, designers, craftspeople, ceramicists, architects, fashion designers, photographers and filmmakers. Indeed, the response was exceptional. We received almost 30,000 individual suggestions, between them nominating 590 different eligible characters – demonstrating not only the depth of achievement of British art but also the public’s passion for it. This pool was handed to our expert Banknote Advisory Committee – John Akomfrah, Sir David Cannadine, Andrew Graham-Dixon, Sandy Nairne, Alice Rawsthorn, Baroness Lola Young, and, from the Bank, Deputy Governor Ben Broadbent and Chief Cashier Victoria Cleland. They used their considerable knowledge, supplemented with views from public focus groups, and whittled down to a shortlist of five characters. What were the criteria? 2  BIS central bankers’ speeches  First, an unquestioned contribution to the visual arts. Second, a wider contribution to British society. And third, an enduring influence.

Lifting the health restrictions has also resulted in some of the demand for services being released, prompting an acceleration in recreation, hospitality and tourism prices. In addition, changes in practices, such as the rise of working from home, have led to higher spending on household appliances, exerting further pressure on their prices. In the case of the euro area and Spain, analysing the disaggregated data reveals the following stylised facts: 1. The magnitude of the increase in inflation is unprecedented in recent times. In the euro area, August saw the harmonised index of consumer prices (HICP) reach 9.1%. In Spain, it has risen from slightly negative rates at end-2020 to 10.5% in August 2022. For context, to encounter a similar rise we need to go back to 1977. 2. This inflationary episode is characterised by its high persistence. In Spain, inflation has stood above 2% for 16 months. The last time this happened was in 2010-2011. You also have to go back to that period to find such a persistent episode of inflation above 2% in the euro area. 3. In terms of its components, the role of energy stands out. 40% of actual inflation in Spain in August was attributable to electricity (2.3 pp) and other energy (1.9 pp). The percentage is very similar in the euro area (43%). 1  4. The persistence and intensity of the rises in electricity and gas prices have been surprising.1 As a result, they lie behind a highly significant portion of the inflation forecasting errors in recent quarters.
The forecasts for growth, the unemployment rate, and inflation that FOMC participants have been submitting since 1979 have always been conditioned on each participant’s views of the future path of policy most likely to foster outcomes consistent with our dual mandate responsibilities – what we refer to as the appropriate path for policy. As of last January, our quarterly Summary of Economic Projections (SEP) now include the projected paths for the federal funds rate and qualitative information about the balance sheet that make up these views. I believe this move significantly enhances policy accountability. For example, suppose inflation were running higher than we would like, and the economic projections in the SEP showed it coming down over the next couple of years. In the absence of policy projections, the public would not know whether the FOMC thought inflation would simply come down on its own or whether it thought that a monetary tightening would be required to reduce inflationary pressures. The inclusion of participants’ policy projections will help communicate such judgments. Furthermore, households and businesses will be able to make better informed decisions if they have a clearer notion of future policy rates; the potential for reduced uncertainty could also lower the risk premium embedded in longer-term interest rates. Now, clearly, our forecasts of what rates are going to be three years from now will often be wrong – and sometimes by a good deal.

In some other areas, we have found that practices of institutions have fallen substantially short of our expectations as enumerated in existing corporate governance principles that institutions must observe. An example relates to the effectiveness of nomination committees and attention to remuneration practices. In such areas, we find merit in providing more specific guidance to institutions in order to achieve greater progress towards the desired state. I alluded earlier to the particular importance of effective governance as we move towards the adoption of more principle-based regulations for the insurance industry. A common misperception that we find in the industry has been the notion that principles-based  2  BIS central bankers’ speeches  regulation equals deregulation or less regulation. It is in fact neither. The move is mainly motivated by two key considerations: first, a recognition that in an environment of fast-paced innovations, attempts to regulate prudent behaviour through detailed and prescriptive rules is just not sustainable as they risk becoming outdated almost as soon as they are written. Second, common rules often do not adequately capture the risks of larger and more complex institutions, or when they do, they are disproportionately onerous for smaller institutions and this can choke off innovation. The adoption of more principles-based regulation is therefore about re-regulating the industry in a manner that better reflects the risks which an insurer faces. There is a third consideration. With greater focus on principles of sound practice, it is left to insurers to design appropriate internal rules that will govern their activities.
Those challenges include the prevailing low interest rate environment; the consequent influx of alternative capital, especially into reinsurance markets; the transformation to the “at retirement” taxation system in the UK; competition in general insurance from overseas locations, possibly linked to regulatory arbitrage; as well as the new Solvency II regime. I plan to focus my time mostly on Solvency II; but will also touch on the “at retirement” taxation changes. Before that, I would first like to reflect upon the role insurance plays in the wider economy: •  Insurance is a critical cog in a financial services sector which facilitates trade and commerce and the efficient allocation of resources. Without a fully functioning financial services sector, the economy would stagnate. That importance of financial services to growth should be one of the big lessons of the Great Financial Crisis for anyone who did not appreciate the fact previously. More specifically, the insurance sector provides a critical risk-transfer role and is a vital long-term investor in the economy. •  The UK insurance industry is also an end-contributor to UK output and employment – being the largest insurance industry in Europe and third in the world. The UK insurance industry is known for its innovation and entrepreneurialism, typified through the modest beginnings of Edward Lloyd’s coffee house. The role played by the insurance sector in future will be contingent upon maintaining that tradition of competition and innovation and the PRA is committed to support that, not least through our secondary objective in respect of competition.

Well directed investment is a key driver of productivity. The very sharp drop in investment in the crisis and the years immediately afterwards cast a shadow that has certainly damaged productivity growth in the recovery. Again the damage to the banking system will have played a part here. If business investment had continued to grow at its pre 2007 average, capital per worker would now be around 5% higher. Firms’ investment intentions are strong at present and the MPC expects business investment to continue to grow strongly over the forecast period. That should increase capital per worker and therefore productivity, albeit with a lag And lastly, productivity over the last two years is likely to have been held back by changes in the composition of the labour force towards lower-skilled and lower productivity occupations. This has almost certainly had something to do with the very fast draining of the reservoir of labour supply that we have seen over the past few years. The rate of decline in unemployment is slowing noticeably now and the level of participation and hours worked seems to be getting close to their trends. So the headwind to productivity from the change in the composition of the labour force should diminish over the next few years. I have given some of the reasons why we expect productivity growth to pick up over the next few years. To be clear, we are not forecasting a sustained burst of high productivity growth but a rather more modest pick up.
But there’s little doubt that, for the UK’s clothing and textile businesses, globalisation mattered a great deal. And if you’re inclined to view de-industrialisation as a sorry tale, it can only be the sorrier for a sector that played such a prominent part in our history and in the industrial revolution in particular. During the ten years Adam Smith spent writing the Wealth of Nations, and a few miles further south of here, the inventor and entrepreneur Richard Arkwright was awarded patents for his new spinning and carding machines. He opened his famous mill at Cromford in 1776, the same year as the book was published. By 1790 mills using his new machines employed 30,000 people. By the 1820s, Britain was producing half of the global cotton  2  All speeches are available online at www.bankofengland.co.uk/speeches  2  1  textiles . Famously, in his two-sector example of the principle of comparative advantage, Ricardo chose Portuguese wine and “English cloth”. And yet it is still worth bearing in mind Smith and Ricardo’s basic insights. If people can move relatively easily from one job to another, employment needn’t fall in aggregate even if it’s doing so in one particular sector. (Nationally, the rate of employment is significantly higher and the rate of unemployment far lower than in the mid-1970s.) And in the meantime, we have all had the benefit of cheaper clothes.

11  There may in any case be interactions between the two . And even when there aren’t, their effects can be quite similar and therefore difficult to distinguish from one another. To generalise, increases in trade and technological innovations both tend to improve overall well-being but, by producing sharp shifts in relative prices, they can also make some people worse off, at least for a period of time. The early classical economists certainly recognised the parallels between technological improvements and 12  free trade. Aware too that the public tended instinctively to support the former , they used these parallels to persuade people of the virtues of the latter. Here, for example, is lawyer and proto-economist Nassau 13  Senior, writing in 1828 : “If we should think it madness to prohibit, or to tax, the use of an improved steam-engine, because it must be injurious to those employed in raising coal, what pretence is there for prohibiting or taxing foreign ribands or velvets because their importation would be injurious to the English silk-weaver? To prohibit every change which is accompanied by individual injury would be to prohibit every improvement whatever”. This is heavily rhetorical but the question could still be asked today. At least in advanced economies many people are doubtful about the benefits of trade (a Pew Research survey in 2014 found that only 28% thought it helped to lower prices and thereby improve real incomes).
8 They call for improvements in both the preventive and corrective arms of the Stability and Growth Pact, more emphasis on debt  6  European Commission European Economic Forecast, Spring 2010. 7  European Commission European Economic Forecast, Spring 2010, page 118. 8  EC Document COM (2101) 250, entitled Reinforcing economic policy coordination published on 12 May 2010. BIS Review 73/2010  3  sustainability and the extension of peer surveillance beyond the budgetary dimension to other macroeconomic imbalances, such as losses in competitiveness, asset price booms fuelled by excessive credit growth and rigidities in product and labour markets. While Malta’s situation is clearly less worrisome than that of some of the peripheral euro area countries, these proposals would benefit our economy as well. The persistence of current account deficits, for example, suggests an erosion of competitiveness and, therefore, the need for higher productivity, the removal of remaining constraints on market efficiency and increased investment in high value added, export-oriented activities. Indeed, the economy’s strong performance up to 2006 owed more to domestic consumption than to exports. Export growth, upon which the sustainability of a small, open economy depends to a large extent, has been insufficient over the past decade, and the consequent loss of market share partly explains why Malta’s income gap with the euro area has not narrowed in recent years. With regard to the internal imbalance, the events of the last two years have brought to a halt the substantial fiscal consolidation that was achieved in the run-up to euro adoption.

Finally, at an EU level, the efforts of individual countries to correct macroeconomic imbalances – and Malta is not alone in facing such a challenge – would be greatly facilitated by an early completion of the Single Market project, particularly in the area of services, and by a strengthening of the economic component of EMU, including the Stability and Growth Pact. In this regard, it should not be forgotten that the economic rationale of a monetary union foresees an important role for surplus countries as well in redressing imbalances within the Union. BIS Review 73/2010  5
The important thing to recognise is that we now have tools other than interest rates that can be used to contain risks in the property and financial sectors. These so-called macroprudential tools were not available to us before the crisis and we are now fully prepared to deploy them if that were needed. The Bank of England is now in a position, for example, to supervise lending to specific sectors more intensively, to make recommendations to banks and building societies to restrict the terms on which new credit is provided, or even to raise capital requirements on mortgage or other types of lending. 6  In June 2013 the Financial Policy Committee concluded that there was scope for banks to reduce their holdings of liquid assets in the near term, and recommended a relaxation in liquidity requirements in order to strike the appropriate balance between achieving resilience and reducing possible impediments to the supply of credit to the economy. That relaxation was subject both to banks meeting the minimum capital threshold, and to additional firm-specific considerations. Today the Prudential Regulation Authority (PRA) has agreed with that recommendation, and is announcing how it will be implemented. The PRA will be making a more detailed statement today and writing to individual firms in due course. 6  BIS central bankers’ speeches  Having these in our toolkit – and if necessary using them – will help us to keep interest rates low to secure recovery without creating risks that make that recovery ultimately unsustainable.

No: the transformation of the Banque de France is a modest but real illustration of such a reform; for years we have been lowering costs and providing greater services, while maintaining our territorial  Page 8 of 9 presence. I am not saying that efficient public management is easy, but I guarantee that it is possible. Better budgetary control will then be compatible with better financing of the most productive expenditures, which must be prioritised - these difficult choices are obviously a matter for democratic debate. The comparison with our neighbours only seems to indicate that in France, for example, spending on pensions, or "economic affairs" (subsidies and tax credits) is much higher.iv Some futureoriented expenditures (most investments - even if some of them are less useful - but also spending on education and research) have a crucial effect on growth, both in the short term and in the long term. France cannot and must not settle for a potential growth rate of 1.2/1.3%v if it aims to return to full employment and lower its debt in the coming decade. Focusing the debate on the quality of public spending  *** I would like to conclude with two authors who are not very “budgetary”. First, La Fontaine, The Swallow and the Little Birds: "To instincts not our own we give no credit, and till misfortune comes, we never dread it". Let us finally aim to anticipate our budgetary difficulties, in order to reduce them.
In the first stage, during the crisis, the SNB made use of EUR/CHF swaps, while in the second stage, when it was confronted with the appreciation of the Swiss franc, it intervened on the foreign exchange market. As part of these unconventional measures, the SNB purchased Swiss franc bonds issued by private sector Swiss borrowers and temporarily extended the terms of its repo operations. Today I am going to focus on the impact that the SNB’s interventions have on its balance sheet. In these interventions, the SNB purchased euros as well as, to a lesser extent, US dollars. These acquisitions led to a significant increase in currency reserves, which rose from CHF 95 billion in December 2009 to over CHF 230 billion at the end of May 2010. The foreign exchange acquired through SNB interventions has been placed in securities. The SNB’s investment policy is founded on the criteria of security and liquidity, but also return. In order to satisfy the requirements of security and liquidity, the SNB has focused on the purchase of liquid instruments of first-class quality. All investment activity is carried out according to a strategy based upon diversification, while also taking into account potentially major but low-probability events. A further aim of this strategy is to ensure maximum resilience of the SNB balance sheet. For the sake of completeness, let me add that, given the accumulation of additional dollar reserves, the issuance of SNB Bills initiated in February 2009 to finance the SNB stabilisation fund is no longer necessary.

Jean-Pierre Roth: Global and Swiss economic outlook Introductory remarks by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 10 December 2009. *  *  *  By and large, our assessment of the economic and monetary situation is the same as in September 2009, with economic and financial developments running according to expectations. Risks remain significant, and for this reason we are maintaining our expansionary monetary policy. Global economic outlook Before I address the outlook for the Swiss economy, allow me to briefly examine economic developments at the international level, since they affect the outlook for Switzerland. Signs of a recovery in global economic activity gathered strength during the second half of 2009. The ongoing normalisation of conditions on the interbank and financial markets, together with the monetary and fiscal stimuli, supported a recovery in production, especially in the manufacturing industry. However, the legacy of the crisis still weighs heavily. The economic rebound of the past few months is largely the result of public sector intervention, and is not yet anchored firmly enough. Except in emerging Asia, the rebound has only partly redressed the losses sustained in 2008 and early 2009. Capacity utilisation rates are still generally low, and access to bank lending remains difficult in some countries. Moreover, both the labour market situation and the need to restore savings levels are weighing on household consumer spending.