samchain/econo-pairs-v1 huggingface dataset:
Monetary policy is most effective when it is firmly established. International upswing is continuing Both real economic activity and inflation in Sweden are highly dependent on developments abroad. Broadly speaking, demand and economic growth since the end of last summer have followed the paths expected by the Riksbank at the time and subsequently. However, when seen over the entire period, growth in the US has been somewhat faster than anticipated. This also applies to the situation in Asia and in Eastern and Central Europe. Conditions are different in Western Europe, particularly in the core countries of the euro area - Germany, France and Italy. Here, demand has not risen as expected and the upswing has been delayed. What has happened since the Riksbank’s last decision on the repo rate in February has followed the same pattern. Recent developments in the US economy have also been unexpectedly positive. This also applies to large parts of Asia, led by China and Japan. In addition, a number of Sweden’s other important export markets such as the UK and Norway appear to have performed somewhat better than anticipated. As regards the euro area, the most recent data does indeed suggest that the recovery in industry has taken root but at the same time domestic demand continues to be weak. The situation in China deserves a special mention. Since 1990, output in China has grown at an average rate of 9 per cent per year. Over the past three years, it has been 8 per cent.

The reason we focus on inflation 1-2 years ahead is because monetary policy affects the economy and inflation with a certain time lag. This approach has served us well over the decade during which we have conducted monetary policy with an inflation target. Since the target was adopted, inflation has by and large averaged 2 per cent. At the same time, we have experienced better general economic progress than during the two preceding decades. The clear target coupled with our mode of action has also helped to make the Riksbank’s policy accessible to both the public and the financial markets. Inflation expectations have been anchored fairly stably around our target and it has been possible to predict our actions rather well. Nevertheless, there is cause to underline that we do not run on autopilot and mechanically change the repo rate in relation to our inflation forecasts. There may be reasons for us to wait before taking a decision in order to be able to perform more in-depth analysis or obtain more information. There may also be reason to take into account additional aspects in our decision rather than just inflation 1-2 years ahead. Such aspects could include how the economy in general would be affected, inflation in both a longer- and shorter-term perspective and the impact on financial stability. But it is important to have a framework that is as explicit as possible, with clearly defined and stated objectives. In this way, everyone can follow our line of reasoning, question it and comment on it.
Economic and financial integration in ASEAN owes at least as much, if not more, to the natural functioning of market forces as it does to official initiatives like free trade agreements. Integration in ASEAN, more so than it has been in the European context, is a bottom-up, organic process driven by: •  trade and investment flows arising from the production networks of global MNCs spanning the ASEAN region; and  •  cross-border capital flows arising from the operations of global and regional banks. BIS central bankers’ speeches  5  The success of ASEAN financial integration therefore requires active industry collaboration and participation. The industry has an important role to play in working with regulators and governments to identify and clear roadblocks to growing their business across borders. The ASEAN Bankers Association, representing the banking associations across all ASEAN members, is well placed to play this role. •  Coming from the industry, you know what makes commercial sense, where the specific obstacles are, and you know how to persuade your governments and regulators to press on with economic and financial integration. •  I wish you fruitful discussions and look forward to your ideas. Thank you. 6  BIS central bankers’ speeches

This past summer alone, for example, the Committee received over 200 public comments on the proposals set out in our third consultative paper, or “CP3” as we call it. The third pillar attracted a degree of controversy among many banks mainly in earlier drafts of the rules, but thanks to the very positive discussions that the Committee had with the industry and with accounting standards-setting bodies, all the pillars of CP3 now enjoy broad support. This brings me to the next part of my address, in which I’ll cover the key concerns that arose during consultations. Proprietary versus public information Certainly, an early concern about the market discipline component of the New Accord was that the required disclosures appeared to go far beyond what banks traditionally reported publicly. In some institutions’ opinion, the Committee was seeking to require the disclosure of information previously considered confidential. While the Committee is mindful of the concern that some information should remain private, we believe that concepts of public versus proprietary information require some reflection. In order to determine whether information should be disclosed, consideration should also be given to end-users’ needs. For example, in order for shareholders, creditors, and counterparties to appreciate the risks of their own exposures to a bank, they must understand that bank’s appetite for risk and its approach to, and methodologies for, managing risk.
2  BIS Review 122/2007  inflation expectations from becoming entrenched below the operational target of 2.5 per cent was one of the main reasons the interest rate was lowered to a very low level in 2003 and 2004, when inflation receded and approached zero. Low interest rates have stimulated demand and output and gradually led to the prospect of higher inflation, which we are addressing by increasing the interest rate. Consumer price inflation is still fairly low, but capacity utilisation is now at such a high level that inflation is projected to move up gradually to 2.5 per cent. Higher interest rates will contribute to a gradual decline in capacity utilisation, thereby preventing inflation from becoming too high. In the long term, monetary policy cannot influence real economic variables such as output and employment; it can only influence nominal variables such as inflation, the nominal interest rate and the nominal exchange rate. When monetary policy serves as an anchor for inflation expectations, it allows the interplay between monetary policy and other components of the economy to function. A good result can be achieved if the social partners take the role of "leader" and the central bank the role of "follower". Wage growth can then be determined in the knowledge of the monetary policy response. Flexible inflation targeting provides a fixed framework for monetary policy and gives a clear indication of how the central bank is to respond in different situations.

The "leader" – the social partners – can internalise the monetary policy response and take the "follower’s" – Norges Bank’s – response to their actions into account. This approach is most relevant when wage setting is centralised. A number of studies2 have shown that countries with a relatively high degree of centralisation and coordination, such as Norway, can achieve relatively low unemployment. When wage-setting is decentralised, monetary policy will instead influence wage growth via market mechanisms, by stabilising aggregate demand for goods, services and labour. Monetary policy that is flexibly oriented towards low and stable inflation will function well whether wages are set at the central, local or individual level 2 . In the initial period after the introduction of the inflation target in 2001, it appeared that the social partners had not yet internalised the response pattern ensuing from the monetary policy mandate. We are now well into a cyclical phase with very high capacity utilisation and low unemployment. In this situation, there may be a risk that wage growth will again accelerate. On the other hand, the experience gained by the social partners that large pay rises push up interest rates may have the effect of curbing pay increases. In local wage negotiations at enterprise level, competition, the supply of foreign labour and the possibility of outsourcing or relocating activities may dampen the impact. Low and stable inflation should not be taken for granted. Norway’s and other countries’ economic history shows that inflation and inflation expectations can become unhinged.
Moreover, new products emerged which also supported the transfer, hedging and dispersion of risks, such as credit derivatives. And the use of these instruments strengthened the inter-relationships between financial market participants across the globe: greater integration of markets went hand in hand with the acceleration of financial innovation and rapid growth of market activity. These developments helped stimulate important changes in banks’ business models. Constraints on growth were eased as funding sources widened. Many banks took advantage of new sources of wholesale funding available from securitisation – the packaging of loans into instruments which could be sold on in financial markets. In many cases, assets were routinely transferred into off-balance sheet vehicles which funded themselves through assetbacked commercial paper, with the sponsoring bank providing a back-up liquidity line. By applying this “originate and distribute” model, banks tapped a new source of funding on a large scale. More traditional and stable sources of funding, such as retail deposits, declined in importance (Chart 1). In addition, many banks saw opportunities to generate new sources of revenue and fee income by developing and deepening their activities in international capital markets. Innovation has provided banks with greater opportunities to hedge and diversify risks. For example, a regionally-based bank in country A can easily lower its geographical concentration, for example by selling credit risk to other investors who had not previously been able to access such exposures, and/or by purchasing exposure to credit risk elsewhere.

(a) Bank of England (2007), 'Decomposing corporate bond spreads', Quarterly Bulletin, December, pages 533-37. (b) Customer funding gap less securitised debt. Where not available, stocks of securitisations are estimated from issuance data. 8  BIS Review 50/2008  Chart 3: Financial market liquidity(a)  Chart 4: Sterling liquid assets relative to total asset holdings of UK banking sector  Liquidity index 1.0  Definition of liquid assets: Broad ratio: Cash + BoE balances + Money at call + Eligible bills + UK gilts Reserve-ratio eligible assets  0.8  Narrow ratio: Cash + BoE balances + Eligible bills  0.6  35  0.2  +  0.0 0.2-  30 25 Cash ratio deposits (1981)  Sterling Stock Liquidity Regime (1996)  0.4 0.6  92  94  96  98  00  02  04  06  20 15 10  0.8  5  1.0  0 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007  08  Sources: Bank of England, Bloomberg, Chicago Board Options Exchange, Debt Management Office, London Stock Exchange, Merrill Lynch, Thomson Datastream and Bank calculations. Percentage of total assets (all currencies)  0.4  Competition and Credit Control (1971)  Year  Sources: Bank of England data and calculations. (a) The liquidity index shows the number of standard deviations from the mean. It is a simple unweighted average of nine liquidity measures, normalised on the period 1999-2004. Data shown are an exponentially weighted moving average.
Following the creditor hierarchy that would apply in liquidation, the various layers – equity, subordinated debt, senior unsecured debt etc – are written down until the losses are covered. And then the last surviving layer(s) of debt are partially converted into equity to recapitalise the continuing parts of the business, which is thus under new ownership. This has given rise to nothing short of a revolution in thinking about possible resolution strategies for SIFIs. Resolution strategies Last November the FSB issued draft Guidance on resolution strategies. Big picture, there are two basic strategies – Single Point of Entry and Multiple Point of Entry. Single-Point-of-Entry Resolution Single-point-of-entry resolution involves working downwards from the top company (Topco) in the group in an exercise that resolves the group as a whole, wherever its problems began. Think of it this way. Losses in subsidiaries are first transferred within the group to the Topco. If Topco is bankrupt as a result, the group needs resolving. Bailin can then be applied to the Topco’s capital structure: writing off the equity and, most likely, subordinated debt; and writing down and partially converting into equity the senior (bonded) debt issued by Topco. Those bondholders become the new owners. If Topco is a pure holding company – its assets comprising only investments in its subsidiaries – a number of advantages follow. The creditors of the operating banks and dealers are left intact; what might be called the group’s ‘operating liabilities’ are protected relative to the ‘capital liabilities’ of Topco.

As Robert Swan, the English polar explorer and environmental leader once said, "The greatest threat to our planet is the belief that someone else will save it." Let us play our part in taking proactive steps to manage climate risk before there is nothing left to manage. I wish you all a fruitful outcome and a successful journey towards building your business resilience against the impacts of climate change. Thank you and Assalamu'alaikum. About GVC Programme: The GVC programme is an initiative by Bank Negara Malaysia together with the GVC strategic partners, which was announced at the COP-27 conference in Egypt in conjunction with Finance Day on 9 November 2022. The programme is envisaged to help SMEs begin their journey in sustainability reporting, to tackle climate change and reduce the nation's carbon footprint. This programme incentivises and assists Malaysian SMEs in implementing impactful, long-term change to green their operations and benefit from the technical advisories and software tools from services provider partners and climate transition financing from the Low Carbon Transition Facility (LCTF)  2/3  BIS - Central bankers' speeches  by Bank Negara Malaysia. Climate change is one of the biggest challenges facing our planet, and GVC strategic partners remain committed to doing its part in addressing this global crisis. 1 Source: United Nation Climate Action 2 Source: Global Turning Point Report 2022, Deloitte Center for Sustainable Progress 3 MSME comprise 37.4% share of 2021 GDP, source: Department of Statistic Malaysia.
As the banking sector is a very important part of the way monetary policy affects the economy, it is essential to closely follow developments in the credit market. Indirectly it also means that it is important that the Swedish banks attend to their problems in the Baltic both forcefully and quickly. This is to avoid the domestic transmission mechanism being disturbed by the international uncertainty. Here monetary policy and financial stability merge. The Swedish National Debt Office and Finansinspektionen (the Swedish financial supervisory authority) have also taken measures to alleviate the financial crisis. The Government has raised the state deposit guarantee and extended it to cover all types of deposits in accounts, it has introduced a guarantee programme, established a stability fund and decided on means of capital injections to the banks. Large fiscal policy stimulus packages Governments in many countries have presented substantial fiscal policy stimulus packages, which have been supported by the countries’ parliaments. Large packages have been presented in China, Japan and the United States, but there is substantial fiscal policy expansion even in a number of European countries. These include Sweden, where there is greater scope, in the form of strong public finances to begin with, than in most other countries. However, it is difficult to determine exactly what effects the fiscal policy measures will have on individual countries and on the global economy. In addition to the positive effects from the recently decided measures, growth is being stimulated by what is known as the automatic stabilisers.

The new European DLT pilot regime, which will come into force in March this year, will allow us to continue our experiments within the boundaries of a simplified regulatory framework. At the same time, the Banque de France is contributing to the reflection on the possibility of a retail CBDC: this is currently what Eurosystem central banks have embarked on, under the ECB aegis, with the ongoing investigation phase for a digital euro. The evolution of the payment landscape leads us to reflect on the ways in which citizens can have access to central bank money, also in the digital world. Let me conclude in saying that tokenization can be a blessing or a curse for the functioning of the financial system. It is my belief that we can collectively make the best of it if we ensure its expansion within a framework of confidence in which good regulation has an important role to play. 3/3  BIS - Central bankers' speeches
The One Belt, One Road initiative by China or recently known as the Belt and Road initiative – that covers areas primarily in Asia and Europe – would add a further USD1 trillion to financing needs in the region over the next 10 to 15 years. This opens up another area of opportunities for Islamic finance. Islamic finance has strong potential to mobilise funds for infrastructure and development needs all around the world – by exploring opportunities – to structure innovative funding modalities for infrastructure financing. The recent issuance of the world’s first green sukuk to fund a solar project in Sabah that amounts to RM250 million – is an example of an innovative financial instrument to tackle global infrastructure needs and green financing, at the same time. Enhanced collaboration with global Islamic finance players and multilateral development 3/4  BIS central bankers' speeches  institutions could also strengthen syndication capabilities, and expand investor base. As a start, Malaysia’s role as one of the founding members of the Asian Infrastructure Investment Bank – opens up new avenues for domestic Islamic financial institutions – to leverage on its extensive network, institutional expertise, and its good track record to reach out to more diverse investors. In closing, I would like to again mention that as Islamic finance enters the mainstream – the road ahead requires Islamic finance to seize opportunities in new growth areas and to deliver its promises.

Our presence in the global Islamic finance system has made its mark largely in the global sukuk market, where we have sustained our position as the market leader with market share of more than 50% over the last 10 years. Domestically, our achievements have placed the Malaysian Islamic finance industry at the forefront. Islamic finance continues to grow, but as it matures and enters the mainstream, the days of double digit annual growth are now behind us. Beyond headline numbers, the industry must now seize opportunities in new growth areas; reinforce the core strengths of Islamic finance; unlock its potential; and realise its intended promises. Aspiration for Islamic finance (IF) The question is – what lies in the road ahead for Islamic finance? I would like to highlight three trends that are sweeping the world, which in turn offer opportunities for the Islamic finance industry to capitalise on. First – is the rise of entrepreneurship. Second – is the growing interest in halal economy; and Third – the global large infrastructure financing needs. Rise of entrepreneurship Starting with the first trend on the rise of entrepreneurship – All around the world, we are seeing more small businesses and start-ups being set up accounting for about 90% of businesses and over 50% of employment worldwide3. These SMEs have become key engines of job creation and economic growth in developing countries, particularly following the global financial crisis. With the rise of the digital economy the SME ecosystem is also expanding with increasing number of new technology start-ups.
As usual there is reason to underline that even though this is our assessment today conditions can of course change in the period ahead. A lot can happen: the imbalances in the United States could result in financial unease that sharply curtails the international economic upswing, or the credit and debt developments in Sweden may prove considerably more worrisome than foreseen today. We may also find that we have overestimated or underestimated the impact on inflation of changes in competitive pressures. So, claims in the media that the Riksbank has closed the door on a particular course of action in the future are misleading as usual. Concluding remarks Allow me to conclude with a few general reflections on the conditions under which monetary policy operates and regarding the expectations one can have on it. Even though developments since the shift in policy regime in the early 1990s have been remarkably good this has, as we now know, neither stopped inflation from occasionally deviating sharply from target nor prevented output and employment from fluctuating somewhat. What is important to realise is that there are always going to be fast changes in the economy and inflation that cannot be foreseen nor fully offset in the short run. No central bank can therefore have full control over inflation and economic activity over time. What monetary policy should normally be able to achieve is to ensure that inflation over a number of years is fairly well in line with the inflation target.

Should that price outlook change, we may find that excessively high price pressures have been established, which may then prove difficult to break. It remains to be seen how long the effects on inflation of the price cuts for certain products will last. This argument, too, can essentially be said to involve an ambition to avoid excessive swings in interest rates and the real economy. Yet another factor that has been discussed for some time by the Executive Board is the rapid growth in household debt and the increases in house prices. A number of commentators have begun to highlight risks in this area. We have previously concluded that the developments are not a cause for great concern. Even though that largely remains our assessment, it has gradually become clearer that the developments in credit and house prices are one argument against looser monetary policy. A rate cut followed by a faster hike could bring about problems through their effects on household indebtedness and consumption. The inflation assessment I presented earlier indicates that inflation will be in line with the target at the end of the two-year period on which we normally focus. At the same time the issues that I have just discussed give cause for a certain amount of caution in interest rate policy in line with the Bank’s clarification of monetary policy in 1999. All in all, the arguments I have put forward advocate leaving the repo rate unchanged, which was also the decision we took yesterday.