samchain/econo-pairs-v1 huggingface dataset:
Accordingly, the behavior of the labor market must be closely monitored in order to prevent the incubation of inflationary pressures. The evolution of output and demand is also important in this setting. If they keep on growing as strongly as they did in the first quarter, an over-utilization of installed capacity may result, generating inflationary pressures. We have paid particular attention to consumption; however, it is unlikely that the current dynamism can be sustained very long. From a longer perspective, the recent increase in consumption may be responding to a recovery from the crisis of 2008–2009 and the earthquake and tsunami of 2010. Estimates of the ratios between consumption, income and their trend levels show no significant differences (figure 11). In addition, a substantial part of the consumption components that show the larger increases – durables and clothing – is generally of imported origin, so a lower exchange rate favors consumption and replacement, especially considering that their rate of  BIS central bankers’ speeches  3  depreciation may have accelerated in tandem with technological change. This is compounded by the low prices of these goods in dollars. Meanwhile, growth in consumer credit, although showing a higher velocity in the margin, has not posted any increases like the ones observed in previous expansion phases or in other emerging economies (figure 12). About the implications of credit behavior, the IEF states that, so far, indebtedness has not risen above its long-term trend.

Variation margin flows -which simply reflect losses and gains in the underlying markets were in many cases much larger than the increases in initial margin controlled by CCPs’ own models.   We need to go more granular than quarterly data to understand the speed of margin increases over that crucial period in mid-March.   We also need to understand how much of the headline increase in initial margin resulted from members simply trading more. Our analysis suggests this varied widely across UK CCPs and over the crisis period. We already know that changing portfolios don’t tell the whole story. For almost all services, volume accounted for well less than half of CCP initial margin increases over March as a whole, with CCP models a much more important driver.13    Finally, to really get into the walls of the dash for cash, we need to look beyond service-level aggregates to understand if particular groups of firms saw their margins increase more than across the service as a whole. 13  Bank of England calculations. 9  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  9  But even as we delve into margin data, we need to keep in mind that the increase in margin is only one piece of the puzzle.
Even loans with a longer duration could in principle be financed by short-term borrowing on the interbank market. The lending rate in the interbank market will thus comprise the bank's financing cost for this loan and is therefore an important factor when the bank decides the lending rate it will offer the company. For loans with a longer fixed term, expectations of the development of the repo rate during the duration of the loan will affect the financing cost and thus the lending rate the bank sets for a longer term loan. A bank that has a surplus to invest can in the same way choose between investing it in the interbank market and lending money. The interbank rate will thus influence the lending rate the bank offers households and companies as it comprises an alternative yield. In addition to the interbank rate, however, the banks' lending rates are determined by many other factors. When setting interest rates, the banks must of course compensate themselves for the credit risks connected with the loan and at the same time reserve funds in their own capital to meet any future losses. The fact that banks from time to time make differing assessments of borrowers' credit rating should not in itself affect how much the banks' lending rate changes when the repo rate is raised. The impact from monetary policy should not, therefore, change merely as a result of the banks changing their assessments of the credit risk.

For a fund such as the Government Pension Fund Global, it is important to be able to stick to the fund's long-term investment strategy in times of turmoil. Changes to the fund's strategy are subject to thorough analysis and political anchoring in the Storting. This governance structure has served us well, and I am sure that it will continue to do so in a more challenging world. With that, I will pass you to my colleague. 2/2  BIS - Central bankers' speeches
But its aftermath forces us to confront the need for adjustment with greater urgency, due to the added imposition of extreme cyclical pressures on what were already unsustainable structural relationships. There are now two additional dimensions to the problem: (1) the stress created by exchange rate regimes that link the monetary conditions of economies at very different stages in the business cycle, and (2) the need for far-reaching fiscal adjustment in the crisis-hit economies of the developed world in the coming years. Again, to simplify, take the case of the United States and China. The Chinese economy is experiencing the pressures of rapid economic growth that threaten to lead to overheating. Chinese wages – especially in the coastal regions are rising rapidly and consumer prices, on a year-over-year basis, are rising at about a 5 percent annual rate. In contrast, U.S. inflation is considerably lower, growth is subdued, and the United States is still 7 million jobs short of the peak reached in 2007. An extreme cyclical imbalance exists between the EME world and the United States. The monetary policy appropriate for the United States is increasingly inappropriate for the vast majority of EMEs and vice versa. This creates for EME authorities a dilemma that cannot be resolved entirely via macro-prudential regulatory policies, regardless of their merit. An EME faces the choice: let its currency appreciate more rapidly and risk losing competitiveness in international markets, or restrain the rise in its currency through intervention and risk inflation.

A fundamental precondition for exchange rate stability against the euro is that the inflation rate in Norway is brought down to the level aimed at by the Eurosystem. In recent years, the rate of increase in prices has been higher in Norway than among euro area countries, which is reflected in the interest rate differential between Norway and the euro area. If we were to lower interest rates to the level prevailing in the euro area in the current environment, inflation would rise rapidly in Norway accompanied by exchange rate volatility. Any movements in the krone exchange rate will be thoroughly analysed by Norges Bank. A policy response pattern involving automatic changes in interest rates in response to movements in the exchange rate, as a fixed exchange rate regime would imply, is inappropriate. A century of growth Chart 11  At the turn of the last century GDP per capita was around NOK 20,000 in present-day value. Today the average is around NOK 250,000, or about 10 times higher than 100 years ago. For purposes of comparison, the increase was barely twofold between 1820 and 1900. Economic growth in Norway was particularly strong in the first 30 years following the Second World War, as a result of the introduction of new technology from the US and new products in Europe. Europe has gradually caught up with the US thanks to the import of technology from the US, effective restructuring and the expansion in global trade.
International organizations, among which the Financial Stability Board, and Standard Setting Bodies have played a very important role in gathering and disseminating information, as well as ensuring adequate coordination among major public authorities. I would also point out that monetary policy has not been the only tool we have used to increase resilience and defuse the shock. Different authorities have worked hand in hand, under a lot of time pressure, including financial regulators and supervisors, to deliver a very comprehensive and largely consistent set of measures to maintain the core functions of the financial system in these unprecedented events. Comprehensiveness and consistency have been key elements in our collective ability to foster resilience. So the test regarding coordination in crisis time has been passed rather well so far. However, it’s not over yet and good coordination should be maintained for the exit phase of support measures, generally speaking. In the field of financial regulation and supervision, there were variations in approaches, see for instance the leverage ratio for credit institutions, which was okay for the duration of the crisis, but led to divergence in the implementation of standards that should not last. Getting out of the crisis and unwinding support measures will require  further coordination and an adequate timing, in order to avoid possible cliff-effects and to address level playing field concerns. Regarding the prevention of crisis, I would be more prudent because, from my perspective, the jury is still out in terms of appropriate coordination across regulators and supervisors.

The other big step in this space will be a Liquidity Accord from Basel. This will be a new Accord. It is a quarter of a century late, as the need for an agreed international approach to the regulation of liquidity was first discussed in the mid-1980s. There remains a great deal of work to be done on this front but no-one should underestimate its importance. This is a package that is likely to change the shape of capital markets by effectively charging banks for the liquidity lines they provide to other parts of the financial system. For that reason there  BIS Review 145/2010  1  will be what the Governors and Head of Supervision call an Observation Period. But some change will be acceptable, as it won’t do for parts of the financial system to subsist on the basis of liquidity lines from commercial banks against which the banking system itself does not actually hold any liquidity buffer. That is not a bad definition of an unsound financial structure. Beyond that staple diet, I want to pick out four things – two of which are central to what has been going on already at the G20 Financial Stability Board work programme, and two of which lie a little bit ahead. The first two are the work on systemically important financial institutions (SIFIs) and on capital markets.
Macroeconomic risks and outlook The war in Ukraine and the lockdown in China weighed heavily on the rebound in activity in Europe, and particularly in France, which had gathered pace in the second half of last year. They also strongly amplified, extended and diffused to consumer prices the rise in producer prices, initially driven by rising energy and raw material prices. In other words, we are now facing a "slowflationary" shock whose magnitude and duration remain highly uncertain at this stage. Nevertheless, the baseline scenario for the euro area as a whole, as set out in the ECB's recently published forecasts, remains that of continued growth, albeit at a more moderate pace of 2.8% in 2022 and 2.1% in 2023, with growth revised upwards to 2.1% in 2024. This baseline scenario also includes higher and more persistent inflation, of 6.8% in 2022, 3.5% in 2023 and 2.1% in 1  2024. The risk to this baseline scenario is clearly one of lower growth and higher inflation. For France, we will publish our new forecasts on 21 June and I cannot give you any scoops today. Nevertheless, it is clear from the latest business surveys that we have just conducted that the growth prospects in the short term should be in line with those in Europe, and a little less unfavourable in terms of inflation. So, based on our business survey in mid-May, early June, we expect GDP to rise by around a quarter of a percentage point in Q2, after -0.2% in Q1.

In this respect, the High Council for Financial Stability turned its recommendation for a debt service to income ratio cap of 35% and a maturity limit of 25 years on new housing loans into a legally binding standard from 1 January 2022, while maintaining the flexibility margin for 20% of quarterly new loan issuance. This measure aims at preventing excessive household debt in a context where housing loan issuance remains strong, while preserving the French model for financing home ownership. In conjunction with the predominance - which borders on exclusivity - of fixed-rate loans in France, it has strengthened households’ financial resilience in the face of the prospect of rising interest rates. Attention paid to the solvency of non-financial players also takes the form of the standard, adopted in May 2018 and extended until 2023, limiting the exposure of systemically important banks to the most indebted large companies residing in France to 5% of their capital. Finally, strengthening financial stability in Europe requires completing the Banking Union. The approach put forward by the President of the Eurogroup last May consists of a stepwise approach across four main workstreams (banking crisis management, depositor protection, diversification of sovereign exposures and provision of banking services within the single market). This stepwise approach is based on trust and realism. We view this as an asset for securing the political agreement that is needed to move towards a more comprehensive and resilient banking union, but which remains dynamic and innovative. 3.
2  For the banks to manage the stress test their Tier 1 capital ratio, that is, their Tier 1 capital in relation to their risk-weighted liabilities, must not fall below 6 per cent. In the stress test the major Swedish banks were calculated to have Tier 1 capital ratios of 8.9–10.3 at the end of the test period. 4  BIS Review 109/2010  Strong GDP growth The Riksbank’s Monetary Policy Report from July forecasts relatively high GDP growth in the coming years: that Swedish GDP will grow by 3.8 per cent this year, and then by on average just over 3 per cent a year in 2011 and 2012. (Figure: GDP growth). We could also note that the first quarter of the year had been better than expected. It is particularly pleasing that the upturn was on a broad front – all of the components of GDP contributed to the upturn. Moreover, the Riksbank also saw good opportunities for a continuing recovery. Domestic demand is being maintained by a continued expansionary economic policy, combined with an optimistic view of the future in both the household and corporate sectors. In addition, growth abroad is expected to rise during the forecast period. This will contribute to an increased demand for Swedish export products, which in turn will benefit business sector investment as resource utilisation rises. Our picture of a recovery in the Swedish economy is also supported by new statistics published after the Monetary Policy Report.

The best we can say is that how the output gap develops in the recovery from Covid will depend on the net effect of the two, both of which will need to move by more than in normal recoveries. There is another element to this part of the story which is hard to assess at present, namely to what extent the more structural changes we have seen during the Covid crisis will persist, and what effect they will have on the recovery? There is a lot of uncertainty around these elements, but my best guess is that we will see 6  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  6  some persistence, not full persistence but not a full reversion to pre-Covid either. We will work more from home than we used to and shop more on-line because new habits will persist to some degree, and to the extent they unwind it will be over a period of time. The second point is that I see reasons to believe that the longer-term negative economic effects of the Covid shock will be smaller than we have seen in the past, particularly in the 1980s and early 1990s. As I described earlier, it seems likely that task and job reallocation and capital redeployment has increased since then, for instance because workers will need less significant retraining to move between sectors.
After that, I’ll be happy to answer any questions you have about what the Fed does and why, and about the economic outlook. As always, what I have to say reflects my own views and not necessarily those of the Federal Reserve System or the Federal Open Market Committee, also known as the FOMC. What the new York Fed does By way of introduction, I will briefly review what my colleagues and I do at the New York Fed. The New York Fed is one of 12 regional Federal Reserve Banks that, together with the Board of Governors in Washington D.C., make up the Federal Reserve System, our nation’s central bank. The Federal Reserve is independent within government. By law, we are charged with managing the nation’s monetary policy – taking actions that raise or lower interest rates to promote full employment and price stability. The Federal Reserve is also charged with promoting financial stability, without which we cannot achieve our economic objectives. We play an important role in the nation’s payments and settlements system, which you might think of as the plumbing of the financial system. And we have a specific mandate to promote economic development in each of our regions. As president of the New York Fed, I serve as the vice chair of the FOMC, the Federal Reserve committee that meets eight times a year in Washington to set interest rates and make other decisions about monetary policy. The members of this committee all strive to achieve our statutory mandate.

Caught in this cross-fire, higher leverage became banks’ only means of keeping up with the Jones’s. Management resorted to the roulette wheel. As firms collectively migrated South-east in Chart 3, leverage increased across the financial system as a whole. Having bet the bank on black, many financial firms ended up in the red. Two lessons for the future suggest themselves from this prognosis. First, when evaluating banks and their management, there is a need for greater focus on returns on assets rather than on equity. Good luck and good management need to be better distinguished. Put differently, returns to investors and managers need to be more accurately risk-adjusted if the right balance between risk and return is to be struck for individual firms and for the financial system as a whole. Second, there is a need to place much stricter system-wide limits on leverage. These limits should aim to prevent the South-Easterly migration by banks under competitive pressure. 1  Charles McKay (1841), “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds”, London: Richard Bentley. 2  BIS Review 85/2009  That suggests these ratios will need to be state-dependent, rising as the temperature rises across the financial system as a whole. Some have called this a counter-cyclical regime. Given its source, it might better be called a counter-cultural regime. Lesson 3: Size does matter The “80/20 rule” has its origin in the study of contagious diseases. For a number of diseases, 20% of the population account for around 80% of the disease spread.
It is important to realise that once the crisis has occurred, the losses cannot be hidden and must be dealt with in one way or another. In this respect Swedish institutions worked well. Party politics were clearly separated from business realities. And the politicians did a good job, realising that bygones were bygones, setting up a fair framework to sort the crisis out. From a political perspective it was important that the banks’ owners were not rescued. People at large had to take substantial cuts in living standards - at least temporarily. Letting the “big guys” go unhurt under these circumstances would have jeopardised the whole operation. 4. The macroeconomic policy mix for crisis management can differ. In our case, there was obviously not much room for fiscal stimulation of the economy. Considering the much lower BIS Review 65/1998  -7-  public debt, there could be more room in some Asian countries but the potential budget effects of the financial losses also need to be taken into account. Monetary policy has a difficult dual role: it has to strike a balance between stimulating the economy so as to ease the burden on the banks and on their borrowers and at the same time ensuring the capital inflows that are needed to rebuild the depleted foreign currency reserves. 5. On top of this - and perhaps the most important factor - there was political consensus. The government sought and received backing from the main opposition party.

In the discussion at Eidsvoll, Christian Magnus Falsen, a key member of the Constituent Assembly, said that no state can exist without a well-functioning monetary system. Another prominent member of the Assembly, Count Wedel Jarlsberg, insisted that the nation must have its own bank. The people’s elected representatives took responsibility for the monetary system, as stated in Article 75 of the Constitution: «It devolves upon the Storting to supervise the monetary affairs of the Realm». The Storting delegated the task of supervising the monetary system to Norges Bank, which was established in 1816. The king would no longer have the authority to print money at his own will. At its inception, Norges Bank’s head office was located in Trondheim, a twelve-day journey from the government in Christiania, and even farther from Stockholm, giving the central bank a geographical – and not just formal – distance from the government authorities. Much has happened since 1814. Norway no longer lags behind other western economies. Inflation is low and stable. We have established a clear division of responsibility for economic policy and well developed institutions founded on the Constitution written at Eidsvoll 200 years ago. Chart: Shift in the world’s economic centre of gravity In 1814, the great powers of Europe dominated world trade. The world’s economic centre of gravity has since then shifted westward. Today, in the 21st century, the centre of gravity is moving across the Pacific to Asia.