samchain/econo-pairs-v1 huggingface dataset:
This is why the most recent FOMC statement clearly stated that underlying inflation was running somewhat below levels consistent with the dual mandate. There are a range of options we could pursue if we judged it worthwhile to go even further in communicating our objectives and intent. We could be even more explicit with regard to the inflation rate that the Committee views as compatible with price stability, for instance, by stating an explicit inflation objective as is common practice in other advanced economies. This could help anchor inflation expectations at the desired rate. It would also clarify the extent to which the current level of inflation falls short of that rate. If we were to go down this path, it would be important to note that any provision of more information on our inflation objective would not be a signal that the inflation element of the dual mandate had become more important than the full employment objective. Instead, it would principally reflect the fact that inflation being “too low” (just like inflation being “too high”) is an impediment to achieving the full employment objective of the dual mandate. If we judged it desirable, we could go still further and provide more guidance on how monetary policy would react to deviations from any stated inflation objective. One possibility would be to keep track of inflation shortfalls when the federal funds rate is constrained by the zero bound, as is the case today.

Andrew G Haldane: Banking on the state Paper by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, and Mr Piergiorgio Alessandri, based on a presentation delivered at the Federal Reserve Bank of Chicago twelfth annual International Banking Conference on “The International Financial Crisis: Have the Rules of Finance Changed?”, Chicago, 25 September 2009. Contributions and comments were provided by Paul Doran, Marius Jurgilas, Samuel Knott, Salina Ladha, Ouarda Merrouche, Filipa Sa, William Speller, Matthew Willison and Nick Vause. * 1. *  *  Introduction  Historically, the link between the state and the banking system has been umbilical. Starting with the first Italian banking houses in the 13th century, banks were financiers of the sovereign. Sovereign need was often greatest following war. The Bank of England was established at the end of the 17th century for just this purpose, financing the war debts of William III. From the earliest times, the relationship between banks and the state was often rocky. Sovereign default on loans was an everyday hazard for the banks, especially among states vanquished in war. Indeed, through the ages sovereign default has been the single biggest cause of banking collapse. 1 It led to the downfall of many of the founding Italian banks, including the Medici of Florence. As awareness of sovereign risk grew, banks began to charge higher loan rates to the sovereign than to commercial entities.
25 The declining cost of technology has also been a key driver of the rise of electronic trading in recent years. Almost 60% of trade in foreign exchange is now executed electronically and close to 50% in repo. BIS Review 130/2007  3  26 Automated and algorithmic trading strategies are becoming more widespread across asset classes. The London Stock Exchange (LSE) reports that the proportion of the order flow on the exchange that is automated has risen from negligible amounts just four or five years ago to approaching half today. This not only has implications for the scale of trading activity – volumes have tripled on the LSE’s SETS system over the past five years – but also the design and location of the trading infrastructure. For many algorithmic trading strategies, processing speed is critical. The faster systems can process trades in just one or two milliseconds: a tiny fraction of the blink of an eye. But ultimately speed and thus the ability to gain a competitive advantage depends on proximity to the platform; hence, the old geographical pull of markets has begun to re7 emerge with exchanges selling space near their trading platforms to those who want to be first in the queue. 27 Many new entrants to the trading arena are therefore competing with incumbent exchanges on the basis of processing speed. These new platforms are also looking for lower cost post-trade solutions.

4 I would like to take some time this afternoon to explore some of these issues, many of which will resurface over the course of this two-day conference. 2. Early demands: the historical context  5 First some history. How did central banks come to assume their “central” role in the financial infrastructure? 6 Internationally, Venice claims a key role in the story, but I will start later with the activities of goldsmiths in 17th century London. Starting from their custody business, goldsmiths began to settle transactions between merchants, across their books or via the transfer of deposit receipts – the early bank notes. Merchants were thereby able to settle obligations with one another without having to carry, count out and value coins: a welcome development, considering that a £ sterling bag of silver coins – a commonly used value for notes – weighed over 30 pounds (14kg for those in the audience baffled by imperial measures)! 7 Over time, so as to accommodate transfers between customers of different “banks”, the banks started accepting claims on each other and, once they found ways to settle these claims, established the first British interbank payment systems. 8 So what were these early settlement mechanisms? At first, banks started settling interbank claims using gold and silver coins. But these were in short supply and, again, costly to transport and exchange. 9 Banks thus eventually innovated by switching to settlement in assets convertible into gold and silver.
The frustrating thing is that, with the best will in the world, there was not much that either we at the Bank or the UK Government could have done to ward off the pressures on UK manufacturing, which had their origins abroad. It's fairly obvious where we are talking about the global slowdown - with negative growth last year of about ½ % in Japan and very slow growth of just 1¼ % in the US and 1½% in the Eurozone. We can go to international meetings and encourage the respective authorities there to stimulate their economies, but there is nothing that we can do about it directly ourselves. It's perhaps less obvious that we cannot influence the exchange rate. Many people think that we could weaken sterling against the euro quite simply by cutting our interest rate relative to the interest rate in the eurozone. But it's not as simple as that. The US has reduced its interest rate far more aggressively than the ECB over the past year or so, but the dollar is actually stronger against the euro than it was to begin with; and the same is true, to a lesser degree, of ourselves, here in the UK, with sterling also stronger against the euro (though weaker against the dollar) than it was a year ago. So there was nothing much - as I say - that we could have done directly to affect these depressing effects coming from the global economy and the resulting weakness of external demand on the UK.

And provided it does not happen too abruptly, that would be the best possible outcome. But if consumer spending were not to moderate of its own accord, we would, in the context of strengthening external demand, clearly need at some point to consider raising interest rates to bring that moderation about. I don't suggest that the timing of any such move is imminent - that will obviously depend upon the timing and the strength of the recovery abroad and on the strength of domestic demand as we move forward. BIS Review 19/2002  3  And that, Subhash, is of course my answer to your second question - "what precisely will happen to interest rates?" In case any of you are confused, I think that what I said was that interest rates will rise - unless they fall or stay the same! Mr President, there is no doubt that the past year or so has been a difficult time for the world economy which made life increasingly difficult for the internationally-exposed sectors of our own economy. We are not yet altogether out of the wood, but there is increasing light between the trees. I am "cautiously optimistic" that the overseas environment will improve as we move through 2002, and that by this time next year we here in the UK will have seen a return to somewhat stronger and better balanced growth, with unemployment not far above its recent lows, and with continuing low inflation.
The development of securitisation has spurred the demand for new types of instruments. This demand led the financial system to generate new assets even at the cost of extending credit to ever riskier sub-prime borrowers. This, for a time, helped sustain a rapid increase of real estate prices which in turn stimulated the growth of mortgages. BIS Review 76/2010  1  The main causes of the crisis therefore lie in the growing “real” imbalances and the uncontrolled development of financial innovations. Overall, these combined evolutions led to a generalized increase in leverage and financial fragility. Against this background, it is quite unlikely that too accommodative monetary policies played a central role in the crisis. Some analysts have pointed out to what they see as an “asymmetric response” by monetary authorities to asset price increases: Central Banks would not lean against asset price bubbles, but were prepared to clean the consequences after they burst. However, we need to ask ourselves whether the unusually rapid credit growth in the years preceding the crisis should not rather have called for complementary policy actions on the supervision side. Some attempts were made in the Eurosystem. In particular, the Bank of Spain enforced dynamic provisioning to curb domestic credit expansion. But the crisis hit globally nevertheless and it raises several challenges for authorities in charge of macroeconomic policies. II –Managing the crisis Starting in august 2007, Central Banks were confronted with major and unprecedented tensions. Increasing uncertainty led to liquidity hoarding by financial institutions.

During the Russia crisis in 1998, for example, the models could not predict that the Russian government would default on payments – this type of event is generally very difficult to build into a model – and the slump in prices this would lead to on many markets. Nor could they predict that liquidity would decline so severely that the banks were unable to sell their securities without this leading to a slump in prices. Asset prices that had earlier moved in the opposite direction and thereby reduced the total risk in the portfolio were now suddenly moving in the same direction. The risks were thus much greater than the models had indicated. These rapid adjustments in market prices with reduced liquidity are one scenario we have repeatedly pointed to as a risk scenario in our assessments of financial stability. If the risk premiums are too low on asset prices in the financial markets, changes in expectations can lead to instability with large price fluctuations and reduced liquidity. If prices of various assets covary to a greater extent than before, the financial agents’ risk exposure could increase rapidly. The fact that many investors have gone over to new types of asset could in this situation lead to declining interest in these assets and to liquidity partly or wholly disappearing from some markets. The events following the collapse of the US hedge fund LTCM in autumn 1998 are an example of this. Do the risk models take these difficulties into account? Yes, or at least in theory.
In 2012 three pre-existing sets of international standards were replaced with the Principles for Financial Market Infrastructure (PFMIs). 13  Crucially, the PFMIs embed the principle that firms providing systemically important financial market infrastructure have a responsibility to be ‘systemic risk managers’ – that is not only managing the risks to the firm but the risks to the system more broadly. I want to look today at three challenges that are increasingly prominent in this world of international financial market infrastructure –  Operational risk, especially cyber Prudential risk The regulation and supervision of cross border infrastructure. There are other challenges, not least the challenges posed to existing business models by new and potentially disruptive technology. But I want to concentrate on the first three because these are front and centre for those charged with ensuring financial stability. Operational Risk  It may appear strange to focus first on operational risk. When we think about financial stability, we usually think first about risk taking, about leverage and credit cycles and about banks, booms and busts – risks that one might call prudential. But in essence, financial stability is about ensuring the financial system can operate to service the real economy and is resilient to all types of shock. 12  Using initial margin as a proxy for the amount of risk managed, activity at UK CCPs has more than doubled in the last three years, from £ in January 2014 to £ in December 2016.The use of supervised payments systems has also increased significantly.

Global pipes – challenges for systemic financial infrastructure Speech given by Sir Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Committee  Official Monetary and Financial Institutions Forum, London Wednesday 22 February 2017  1  All speeches are available online at www.bankofengland.co.uk/speeches  It is said that the first 500 years of an institution’s life are the most difficult. By that reckoning, the Bank has 177 years to go before we reach less challenging times. But at least, with 323 years behind us, we can draw both inspiration and warning from those who have gone before us. In difficult times, I certainly take both from my predecessor, Michael Godfrey. Godfrey was one of the three co-founders of the Bank in 1694 and its first Deputy Governor. But his tenure was short. While on Bank of England business in Flanders, in 1695, he sought a meeting with King William III. William was at the time engaged in the 9 Years War and busily laying siege to the town of Namur. Keen to demonstrate his loyal and fearless service, Godfrey ignored his monarch’s warning that as a central banker in a war zone he should keep his head down. His head was promptly removed by a French cannonball. So when faced with today’s challenges, Godrey’s fate reminds me that previous inhabitants of this post have seen more testing times.
Denis Beau: The industry of confidence - how to build the financial sector of tomorrow Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the FINTECH R:EVOLUTION 2021, Paris, 14 October 2021. * * * Ladies and Gentlemen, First of all, I would like to thank France Fintech and its chairman Alain Clot for inviting me to take part once again in this major annual meeting of the French fintech industry: Fintech R:evolution. At the Banque de France and the ACPR, we believe it is essential to maintain a sustained and high-level dialogue with all the innovative players in the French financial sector and, more importantly, to contribute, in our own right, to the vitality of the French fintech ecosystem. It is therefore with satisfaction that I observe, year after year, the strengthening of the ties and trust between the Banque de France and France Fintech. After the partnership concluded two years ago, the year 2021 marks a new step since we are co-organising this week dedicated to fintechs, the French Fintech Week. I see this as a concrete illustration of "team spirit", which is an asset of the French financial centre and which I believe should be maintained and developed. With this in mind, I would like to share with you some observations on the ongoing transformation of the financial landscape, on its consequences for our role as central bank and supervisor, and finally on the challenges that we must not miss collectively. 1.

I have in mind, in particular, the framework for the development of decentralised finance (Defi), for which the usual regulatory frameworks come up against the absence of easily identifiable issuers or providers in an environment governed by protocols executed automatically without intermediaries, and the absence of an appropriate jurisdiction for the services offered. In order to build trust in the financial industry of tomorrow, we therefore need to follow together a two-pronged learning curve: exploring the transformation potential of new technologies on the financial sector, and identifying the regulatory, governance and best practice principles that must accompany this transformation. In this respect, I cannot emphasize enough the relevance for us of the experiments that we have recently conducted with the sector, for our activities of putting into circulation the currency that we issue as a central bank, as well as for our activities as supervisor of banks and insurers. The Banque de France thus performed nine experiments with “wholesale” central bank digital currency between mid-2020 and today. As for the ACPR, it conducted this year, following the publication of its July 2020 report on the governance of algorithms which outlines the principles of the proper use of AI in the financial sector, its 1st Tech sprint to test the market in practice on the concept of algorithm explainability.
The economy is currently in excellent shape and has clearly strengthened during the past two years. At the monetary policy assessment at the end of 2004, we had suspended a normalisation of the interest rates after previously having lifted the three-month Libor from a low point of 0.25% to 0.75% in June and September. The three-month Libor remained at that level up to December 2005 when we made the decision to resume the normalisation process, given the improved economic outlook. Today's decision – an interest rate hike for the fifth time in succession – confirms the stance we have taken. International environment The change in the international environment with the most tangible impact since the monetary policy assessment in September concerns the price of oil. The current oil prices are clearly below the highest level of 78 dollars per barrel of Brent crude which was reached in August. Will we see higher oil prices again? There is no real conclusive answer to this question. What we have witnessed is nonetheless the longest interruption of a rising trend since the beginning of 2004. This decline will weaken inflation in most countries in the year ahead. However, the economic impact of the reduced oil prices is likely to be low, if we bear in mind that the oil price is still approximately three times higher than it was five years ago. At least the oil price has not put any additional damper on the economy since the last monetary policy assessment.

The fact that the U.S. economy has continued to grow at around a 2 percent pace in 2013 despite this quite intense fiscal restraint provides evidence to the second key point, which is that the private sector of the economy has largely completed its healing process and is now poised to ramp up its level of activity. Key measures of household leverage have declined and are now near the lowest levels they have been in well over a decade. Household net worth, expressed as a percent of disposable income, has increased back to its average of the previous decade, reflecting rising equity and home prices and declining debt. Recently, banks have eased credit standards somewhat after a prolonged period of tightness. As a result, we are now experiencing a fairly typical cyclical recovery of consumer spending on durable goods. For example, sales of light-weight motor vehicles have increased steadily over the past four years, reaching an annual rate of 15.7 million in the third quarter of 2013, though sales in September and October have been somewhat below that average. Similarly, after five years in which housing production was well below what is consistent with underlying demographic trends and the replacement demand for houses, it now appears that we have worked off the excess supply of housing built up during the boom years of the last decade.
The sectoral contributions to this rise in debt are roughly equally split between households, companies, the financial sector and governments. The accumulation of debt has perhaps been greatest within the financial system. Among UK and US banks, leverage has increased dramatically over the past century. The ratio of assets to equity rose from single digits at the start of 20th century to over twenty by its end. 5 Despite recent capital raising, banks’ leverage remains high absolutely and relative to the past, at between 20 and 50 times equity (Chart 9). 2  Laffer, A (2004), “The Laffer Curve, Past, Present and Future”, available at www.heritage.org. 3  Krugman, P (1989), “Market-based Debt Reduction Schemes”, in J Frenkel (ed. ), Analytics of International Debt, IMF. 4  McKinsey’s Global Institute (2010), “Debt and Deleveraging: the Global Credit Bubble and its Economic Consequences”. 5  Haldane A G (2009), “Banking on the State”, available at www.bankofengland.co.uk. BIS Review 10/2010  3  Among households, debt-to-income ratios have risen materially over the past twenty years. In the UK, household debt-to-income ratios rose from around 100% in 1988 to a peak of around 170% in 2008. In the US over the same period, the household debt-to-income ratio rose from 80% to 135%. From different starting points, similar trends are evident in Spain, Canada and South Korea. Most households in these countries still have significant net wealth, however; in the UK, total assets are five times household debt. Those debt trends are repeated in parts of the corporate sector.

Among UK companies, debt as a fraction of companies’ total financial liabilities has risen from around 20% in 1988 to around 34% today. In certain sectors, the run-up in debt has been more dramatic – for example, among US and UK commercial property companies whose leverage has more than doubled in the past decade. It is also true of some companies subject to leveraged buy-outs including, of course, Liverpool Football Club. Finally among sovereigns, the picture up until recently has been benign with public debt flat relative to GDP. But the crisis means that picture is set to change dramatically. Among the G7 countries, the IMF forecast that public debt ratios will rise from around 80% of GDP in 2007 to around 125% by 2014. In the UK and US, public debt ratios are forecast by the IMF to double, mirroring the pattern following past financial crises. 6 Taking together the debt position of the financial sector, households, companies and sovereigns paints a sobering picture. Total debt ratios relative to GDP rose significantly in all ten countries studied by McKinsey’s, from an average of around 200% in 1990 to over 330% by 2008. 7 Over the same period, UK debt ratios more than doubled, from just over 200% to around 450% of GDP. To date, servicing these debts has been cushioned by policymakers’ actions.