samchain/econo-pairs-v1 huggingface dataset:
In a pre-emptive move, MAS further undertook a tightening of monetary policy in October 2007 and April 2008, even as there were heightened concerns over developments in the US economy. 7. Between April 2004 and June 2008, the $ appreciated by 12.2%. Against the $ the $ appreciated by 23.4%. The policy moves have had a clear restraining effect on CPI inflation. For example, while WTI oil prices in $ have increased by more than 70% from a year ago, domestic electricity tariffs and petrol prices rose by around 30% each. Similarly, while the IMF global food and beverage index has soared by 43% from a year ago, domestic food prices picked up by a more moderate 9%. The effects of our policy tightening will continue to restrain cost and price pressures going forward. 8. However, we cannot totally insulate ourselves from the increases in global food and oil prices. Hence, we must ensure that inflation expectations remain firmly anchored and that external price changes do not trigger second round effects. For monetary policy, our objective continues to be price stability over the medium-term. At the same time, other policy responses, as well as changes in household and business behaviour have been complementary toward this end. 9. MAS’ current monetary policy stance announced on 10 April 2008 remains appropriate given our assessment of current external economic developments. The next monetary policy statement will be released in October as scheduled. Financial stability 10.

As I noted earlier, that reflects the preponderance of adverse cost shocks, which we have largely accommodated, whether by accident or design. But the concentration of such shocks runs the risk that the MPC is no longer seen as taking the target seriously. Having a target in which the acceptable deviations from target are in effect hardwired in might reduce that risk. 6  See, for instance, the forecast errors box on pp.48–9 of the August 2010 Inflation Report. 7  See Bean (1998). BIS central bankers’ speeches  3  Against that, a nominal income growth target has two drawbacks. The first is that the data for nominal income is less timely than that for inflation and subject to revision, sometimes significantly so. Chart 2 shows the first estimate of nominal income growth, together with the current vintage of data; one should not take comfort from the concordance between the two series in the recent past, as the recent data have not yet had much opportunity to be revised! The average absolute revision over 1993–2009 is a full percentage point. Now the susceptibility to revision is hardly a knock-out blow. After all, the data on growth and employment are also subject to revision and recognising that the data are an imperfect guide to reality is part and parcel of setting policy. But the susceptibility of the data to revision would make it somewhat harder for the public to understand the MPC’s objectives and for Parliament to hold us to account.
The financial system is similarly a network, with nodes defined by the financial institutions and links defined by the financial interconnections between these institutions. Evaluating risk within these networks is a complex science; indeed, it is the science of complexity. 4 When assessing nodal risk, it is not enough to know your counterparty; you need to know your counterparty’s counterparty too. In other words, there are network externalities. 5 In financial networks, these externalities are often referred to as contagion or spillovers. There have been many examples of such spillover during this crisis, with Lehman Brothers’ failure a particularly painful one. That is why there have been recent calls to calibrate regulatory requirements to these risk externalities. 6 These network uncertainties make it tremendously difficult for risk managers to identify and price, and hence manage, balance sheet risk. Consider first evaluating risks across the portfolio of an individual firm. There is evidence that firms find aggregation of risks across their balance sheet extremely difficult to execute. 7 To the extent this is done at all, it requires firms to make assumptions about correlations between asset prices. But at times of stress, asset correlation matrices are unlikely to be stable and correlations invariably head towards one. So pre-crisis measures of balance sheet risk are likely to be significant under-estimates. Chart 11 looks at asset correlations over the past few years. Note their instability and abrupt upward shift during crisis. These risk externalities will tend to be amplified when aggregated across the network as a whole.

It also raises questions about the operation of anti-money laundering and other regulation to prevent illicit finance. An alternative to allowing tokenised deposits to circulate freely and be directly transferable would be to require transactions on new forms of ledger, for example transactions in smart contracts involving tokenised deposits, to be settled ultimately by the adjustment of bank ledgers as happens now. In other words a transfer of tokenised deposits on one set of ledgers would trigger the adjustment of individuals’ bank account balances and be settled by a transaction between the banks involved. In that case, deposit money issued by a bank could only ever be held in an account at that bank. It is important that as we develop the regime for payment stablecoins, we also develop the approach for tokenised bank deposits. This will allow, banks and non-banks alike, that want to develop payment solutions using new technologies to understand clearly what is possible and what is required in the respective regulatory regimes. The PRA intends to set out its approach in this area alongside the Bank’s consultation on the payment stablecoin regime. It is of course possible that commercial banks might wish to offer payment stablecoins as opposed to tokenised bank deposits. In such cases, I think we will need to be very alive to the risks of confusion on the part of customers as to protections they are entitled to and confusion of business models within the bank itself.
the result of large purchases of sovereign bonds by Asian central banks and oil- exporting countries. Depending on which hypothesis is true, the implications for the monetary policy are different. If the long-term rates go down as a result of poor growth prospects, the current short-term interest rates should be lowered respectively so as to prevent possible deflation. If, however, specific factors related to globalisation or decrease in the risk premium are the cause of persisting low long-term interest rates, the short-term interest rate should be higher in order to achieve appropriate restrictiveness of the monetary policy  24  See Corbo V., Landerretche O., Schmidt-Hebbel K. “Does Inflation Targeting Make a Difference” in: N. Loayza and R. Soto (red.) “Inflation Targeting: Design, Performance, Challenges” (Central Bank of Chile: Santiago 2002). 25  Gürkaynak R.S., Levin A.T., Marder A.N., Swanson E.T. “Inflation Targeting and the Anchoring of Inflation Expectations in the Western Hemisphere”, forthcoming in Mishkin, Frederic and Klaus Schmidt-Hebbel (red. ), Series on Central Banking, Analysis and Economic Policies X: Monetary Policy under Inflation Targeting (Santiago, Chile: Banco Central de Chile), 2006 and Gürkaynak R.S., Levin A.T. Swanson E.T. “Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden”, Federal Reserve Bank of San Francisco Working Paper 2006-09, March 2006. 26  For example a question whether monetary policy should burst asset bubbles was hotly debated during the large European Central Bank conference on 16 to17 March 2006.

Enterprises are increasingly becoming price-takers, and thus even in a situation of rising costs of manufacturing, they are unable to lift prices and shift the growing costs onto the customer. Similar is true for wages, whose level is determined on the increasingly global labour market. Research on the manufacturing sector in EU Members States (for the years 1988 - 2000) has shown that the increase in the openness of that sector (growing import) caused a fall of prices by 2.3%, a growth in productivity by 11% and a drop in margins by 1.6%. Altogether, it may explain the inflation fall by 0.14% in annual terms over that period 11 . When looking at the price processes from the microeconomic perspective, vital structural changes can be observed, which bring about lower inflation. Table 3.
At the same time, I want to emphasise that these monetary policy measures cannot address the root causes of the crisis. The longer we carry on with a highly accommodative monetary policy, characterised by extremely low interest rates and excess liquidity in the banking system, the more we will see a phenomenon manifesting itself with greater and greater evidence. I am referring to what used to be known as “instrument instability” in policymaking: the need to apply larger and larger doses of the same policy interventions only to see their macroeconomic influence becoming more and more tenuous. Monetary policy is a relatively blunt instrument that will not in itself change the fundamental course of economic developments, when imbalances are plural and lie outside its sphere of responsibilities. The causes of the crisis are to be found in the policies that led to an accumulation of huge imbalances in several euro area member states. In some countries imbalances occurred because of imprudent fiscal policies, not least surging expenditures in a fast-growing public sector or spending on social transfers or excessive reliance of fiscal structures on revenue sources that evaporated quickly as the crisis destroyed the income-generating capacity of entire sectors. In other countries we saw a strong increase in the indebtedness of the private sector, reflecting lower financing costs and easier access to finance. This latter development was in some cases fuelled by imprudent bank lending practices. On top of that, banking supervision and regulation did not always mitigate the destabilising tendencies.

The lessons of Northern Rock were dramatically underscored a year later by the failure of RBS and Lloyds. Faced again with the choice of insolvency or taxpayer intervention, the government was forced to inject £ into the two banks. The banks were not put into insolvency and it proved impossible fully to write down the existing shareholders or impose losses on the bond holders. The first lesson from this was that constructive ambiguity simply didn’t work. The market had always suspected this to be the case. The implicit subsidy enjoyed by the largest banks before the crisis illustrated the market’s assumption that the state would always intervene to prevent their bankruptcy. And the market was generally proved right. The exception that proved the rule was the Fed’s decision to let Lehman Brothers enter insolvency. The fallout globally from Lehmans demonstrated dramatically, why, for large banks that perform critical functions, insolvency is not a viable option. The second lesson, which follows from the first, was that if we want, when a bank fails, to have better options than a disruptive insolvency or a taxpayer bailout, those options have to be put in place well beforehand. Doing so comes at a cost to banks and to public authorities. But if at the point of failure, there are no better options than were available in 2008, moral hazard cannot be avoided.
For example, it means that you, the banks, should now raise interest rates on all household deposits, even short-term ones, and share a somewhat larger proportion of your profits with your clients (Michl, 2019a). Let's base our economy on savings, not on debt. A month ago I made a speech at the University of Economics and Business in Prague (Michl, 2023). I would like to follow up on the speech here, recap its main ideas and expand on them in the context of new data on the economy. I started the speech at the University of Economics and Business by saying that I had good news for the public: inflation is finally falling. This is being confirmed. Annual headline inflation peaked in September last year, when it reached 18%. We managed to stop it. In line with our expectations, a gradual downward trend in inflation started in February this year. Inflation fell to 16.7% in February and then to 15%. In April, it stood at 12.7%. The inflation figure for May (11.1%) was published on Monday this week. It should fall to below 10% in annual terms within two months. This is not a victory. In the second half of the year, inflation will still be at a level we must not put up with. We must not get used to it. We must not adapt to it. Interest rates will therefore remain high  1/6  BIS - Central bankers' speeches  for longer.

However, that is a political decision and it is not within my competence. In any case, we need our tightest monetary policy in twenty years to be accompanied by a credible budget consolidation plan, which the public will trust to support our efforts to reduce inflation. Inflation is our responsibility. However, we are in this together with the government. We need support from fiscal policy and from you. Reducing inflation is in the country's interest. We have already tamed several money flows in the economy. Above all, reducing the country's debt is now needed for a long-lasting return of inflation to low levels. However, banks should also raise interest paid on all household deposits and motivate people to save even more. And this is what we should fight for together. For less debt and more savings. In the interest of the republic. References Adam, T. and Michl, A. (2022). Inflace v R:cyklický i acyklický píbh? [Inflation in the Czech Republic: A cyclical or acyclical story?] (cnBlog – official blog of the Czech National Bank). Adam, T. and Michl, A. (2023). Inflace klesá – prbžné vyhodnocení dezinflaního procesu v esku [Inflation is falling – an interim assessment of the disinflation process in the Czech Republic] (cnBlog – official blog of the Czech National Bank). Bianchi, F. and Melosi, L. (2022). Inflation as a Fiscal Limit (external link). (FRB of Chicago Working Paper No. 2022-37). 5/6  BIS - Central bankers' speeches  Cochrane, J. H. (2023). The Fiscal Theory of the Price Level. Princeton University Press.
François Villeroy de Galhau: Ethics and trust in finance Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the 6th "Ethics and Trust in Finance" Global Prize ceremony, Paris, 15 January 2018. * * * Ladies and Gentlemen, It is with great pleasure that I welcome you all to the auditorium of the Banque de France for the 6th "Ethics and Trust in Finance" Global Prize ceremony. I would particularly like to welcome Angel Gurria, Secretary-General of the OECD, and Professor Paul Dembinski, the Co-chair of the prize. The venue that you have been invited to today sends a message in itself: as the Autorité de contrôle prudentiel et de résolution is backed by the Banque de France, some might have a tendency to think that the bank and insurance supervisor, as the "guardian of the temple", would only be concerned with compliance with prudential rules, which are collective and compulsory. They might also think that the supervisor would consider that an ethical approach is too poorly defined to be inspected, as each financial institution – and even each professional – has their own perspective on it, and would also consider that an ethical approach leaves them free to look after the interests of their clients. The philosophers among you will have recognised in this divergence between rules and ethics the classic contrast between Kant's "categorical imperative" and Aristotle's "practical wisdom".

But as we strengthen international regulation, we must not lower our guard in terms of ethics. Ten years later, this would generate the opposite imbalance to that of 2007–08. In other words, there's a risk that the pendulum could swing back the other way. 2. Ethics must permeate the day-to-day practices and culture of financial institutions. Over and above the good intentions, declarations and codes of conduct, which did nothing to prevent the excesses that caused the 2008 crisis, the challenge now is for all actors from the bottom to the top of these organisations to adopt an ethical approach. As the "Banking Conduct and Culture" report of the Group of Thirty, which brought together private and central bankers and academics, asserted, the "tone from the top" must have an "echo from the bottom". This begins with the Boards of Directors and the management teams, who must always be exemplary, and who need to realise that their behaviour is scrutinised at all times for indications of what is acceptable and what is not, irrespective of their declarations of intent. Actions speak louder than words. It then requires employees to be trained and informed on ethical standards on a regular basis and not only on their first day on the job. Situations change; new developments can be an opportunity to reconsider existing practices; stakeholder expectations evolve. Ethics – just like technical issues – must be subject to constant communication and ongoing training. And this is no easy task.
I will come back to this later on, but for now let me emphasise that these conditions, related to the medium-term inflation outlook and linked to underlying inflation, seek to avoid a premature tightening of our monetary policy in the face of increases in inflation above target when these are considered to be temporary or caused by some volatile or exogenous element, such as energy prices. Finally, with respect to the APP, the Governing Council expects net purchases under this programme to end shortly before it starts raising the key ECB interest rates. Therefore, there is “chained forward guidance” whereby the horizon for net asset purchases remains linked to the moment in which the next interest rate hike takes place. 5  For more details, see the full transcript of the Interview with the Governor published in Bloomberg of 27 July 2021. 7  3 An analysis of the current high-inflation episode through the lens of the new ECB monetary policy strategy  The last part of my talk today refers to how the ECB is handling the high-inflation episode that has been taking place worldwide, and in the euro area, over the last few quarters. And, to be clear from the very beginning, let me emphasise that, in my view, the ECB’s response to this shock can be perfectly rationalised in the context of the new monetary policy strategy that I have just sketched.

Accordingly, the region’s economic performance has a most significant influence on Spanish banks’ balance sheets, and the risks arising from these exposures may potentially become systemic. At the Banco de España, then, several directorates general – including Economics, Statistics and Research; Financial Stability, Regulation and Resolution; and Banking Supervision – devote many resources to monitoring all that occurs in the Latin American region from the real and financial perspective. However, the Banco de España remains ambitious to strengthen its knowledge of and links to the region’s economic agents. Our first Strategic Plan, for the 2020-2024 period, approved in January last year, actually set as one of its priorities that of increasing our contribution to this objective. As part of this aim, we are pursuing a series of medium and long-term-oriented actions in the sphere of cooperation with Latin American central banks and institutions. We also seek to extend and enhance our analytical capacity in respect of the region’s economies and financial systems. We are convinced that these seminars are a firm step forward in this direction. The aim of this webinar is to shed some light on how remittance flows during the health crisis have influenced Latin America’s macroeconomic and financial stability. As you are well aware, the Latin American economic situation has been particularly affected by the COVID-19 pandemic. Along with the human cost in lives, the effects on poverty and income distribution have been very severe.
3 – A year of inclusion We can look forward to two real advances in inclusion in 2019: a fifth consecutive year of declining household over-indebtedness, by almost 40% over this period, and the implementation of a cap on bank charges at EUR 25 per month for more than three million vulnerable customers. Within this population, the specific offer – capping charges at EUR 20 per month and EUR 200 per year – now benefits 464,000 customers, or an increase of 32% compared with end-2017. I would like to take this opportunity to thank the banking community, which has worked hard to meet its commitments. Now, these commitments must be enhanced, and sustained. Enhanced in 2020: banks must detect fragile customers even more efficiently; they must correct the few remaining shortcomings; and they must raise awareness of their specific offers. These commitments must be sustained over time, and will be monitored by the ACPR, and by the Observatory for Banking Inclusion, which I chair, with an active role for the associations. Climate change will also be the priority in 2020. And you can count on the determination of the Banque de France and ACPR – with its new Climate and Sustainable Finance Committee – to support the greening of the financial sector. We will conduct the first climatic stress tests in the coming months. The aim of this exercise is twofold: to better identify the resilience of banks and insurers to climate risks, and to speed up the methodological work in order to have quality assessments.

**  1 – A year of stabilisation Last year, I had talked about the three challenges for growth: uncertainty, isolationism – particularly the United States – and impatience, which is hampering sustainable reform efforts. None of these has disappeared. But French growth is holding up at 1.3% in 2019 despite a slowdown at the end of the year, and we are expecting 1.1% in 2020. And we can practically rule out a US or European recession in 2020, which was often feared last year. These initial signs of economic stabilisation, highlighted in our latest December Eurosystem Staff projections, reflect a relative decline in trade uncertainties. If this stabilisation materialises, it should result in a stabilisation of monetary policy. This means two things: Seen from today’s perspective, like the markets do, it is [therefore] reasonable to expect that over the coming months our policies and interest rates will remain stable. The year 2020 will be all the more conducive to conducting the strategic review of our monetary policy under Christine Lagarde, focusing particularly on the key issue of our inflation target. Stabilisation of regulations too, for banks and insurers. This is important for you, as it is for me, even though we do not always understand it in exactly the same way. We mustn’t get carried away – there will not be a Basel IV –, or backtrack: we must transpose in Europe the Basel III international agreement concluded in December 2017.