For many people, buying a franchise has proven to be a good choice, but like any other financial decision, there is no one-size-fits-all answer to the question “Is a franchise right for me?” Buying a franchise involves a major financial outlay and owning one often requires an “all in” lifestyle commitment. If you’re thinking about whether your future could be in a franchise, follow the FTC Business Blog for a series we’re calling Franchise Fundamentals. We’ll explore some of the factors to consider as you investigate franchise opportunities. The first topic: debunking myths and misconceptions about becoming a franchisee.
Myth #1: Being a franchisee is the same as owning your own business. Owning a franchise isn’t the same as being a business owner. In fact, the franchisor may control many aspects of your business – for example, your site location, your sales territory, the design of your retail establishment, and the products or services you can (and can’t) sell. Of course, the right franchisor may assist you with training and expertise, but that help comes with a price both in terms of finance and control.
Myth #2: Buying a franchise will give you “be your own boss” status. After years of earning a; salary, many prospective entrepreneurs look to franchise ownership as a way to exercise autonomy. Not so fast. Franchise agreements often give franchisors authority not only over big-picture decisions at the outset, but also over some day-to-day operations – how you can advertise, what your sign must look like, where you buy supplies, etc. If part of your motivation for considering a franchise is to live that “be your own boss” lifestyle, investigate thoroughly first.
Myth #3: Liking a company’s products is the best indicator that you’ll achieve success as a franchisee. Successful franchisees often say it helps to like the product or service, but being a satisfied customer is no guarantee that a franchise is the right fit for you. Some franchises – say, auto repair or tax preparation – require technical expertise or special training. Are the skills you bring to the table a good fit for the franchise? And has your previous work experience given you the financial and management know-how essential for success?
Myth #4: Owning a franchise is an excellent source of passive income. Who unlocks the shop several hours before opening, turns off the lights at the end of a very long day, and is there in between to handle payroll, customer service, and maybe even routine maintenance? It’s often the franchisee. Even franchisees who choose to hire day-to-day managers will likely find that owning a franchise involves a major commitment of time, effort, and resources. That cruise-ship-and-golf-resort image some people have of franchise ownership just doesn’t square with reality.
Myth #5: Owning a franchise is a financial “sure thing.” The only sure thing in franchising or any other business model is that there’s no such thing as a sure thing. Spending your nest egg for a national name isn’t a guarantee of success. Certainly, your skills and commitment factor into the equation, but so do a lot of variables beyond your control – demand for the product or service, competition, and local and national economic conditions, to name just a few. What’s more, under your franchise agreement, you may have to pay the franchisor even if you’re losing money. Those are just some of the intangibles to consider if you’re thinking about a franchise.
Compliments of the Federal Trade Commission.The post FTC | Franchise Fundamentals: Debunking five myths about buying a franchise first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The Commission propose regulation to tackle cyber threats and incidents.
On the 18 April 2023, the Commission has adopted a proposal for the EU Cyber Solidarity Act to strengthen cybersecurity capacities in the EU. It will support detection and awareness of cybersecurity threats and incidents, bolster preparedness of critical entities, as well as reinforce solidarity, concerted crisis management and response capabilities across Member States.
The Cyber Solidarity Act establishes EU capabilities to make Europe more resilient and reactive in front of cyber threats, while strengthening existing cooperation mechanism.  It will contribute to ensuring a safe and secure digital landscape for citizens and businesses and to protecting critical entities and essential services, such as hospitals and public utilities.
The Commission has also presented a Cybersecurity Skills Academy, as part of the 2023 European Year of Skills, to ensure a more coordinated approach towards closing the cybersecurity talent gap, a pre-requisite to boosting Europe’s resilience. The Academy will bring together various existing initiatives aimed at promoting cybersecurity skills and will make them available on an online platform, thereby increasing their visibility and boosting the number of skilled cybersecurity professionals in the EU.
The Commission has also proposed today a targeted amendment to the Cybersecurity Act, to enable the future adoption of European certification schemes for ‘managed security services’.
Commissioner Thierry Breton, responsible for the Internal Market, said:
“Today marks the proposal of a European cyber shield. To effectively detect, respond, and recover from large-scale cybersecurity threats, it is imperative that we invest substantially and urgently in cybersecurity capabilities. The Cyber Solidarity Act is a critical milestone in our journey towards achieving this objective.“
Compliments of the European Commission.The post Cyber: towards stronger EU capabilities for effective operational cooperation, solidarity and resilience first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Today, the Commission adopted two proposals for a Council Recommendation in the context of the European Year of Skills, with the aim to support Member States and the education and training sector in providing high-quality, inclusive and accessible digital education and training to develop the digital skills of European citizens.
The proposals address the two main common challenges jointly identified by the Commission and EU Member States: 1) the lack of a whole-of-government approach to digital education and training, and 2) difficulties in equipping people with the necessary digital skills.
Strengthening key enabling factors
Despite progress and some excellent examples of innovation, combined efforts have so far not resulted in systemic digital transformation in education and training. Member States still struggle to attain sufficient levels of investment in digital education and training infrastructure, equipment and digital education content, digital training (up-skilling) of teachers and staff, and monitoring and evaluation of digital education and training policies.
The proposal for a “Council Recommendation on the key enabling factors for successful digital education and training” calls on all Member States to ensure universal access to inclusive and high-quality digital education and training, to address the digital divide, which has become even more apparent in the light of the COVID-19 crisis. This could be achieved by creating a coherent framework of investment, governance and teacher training for effective and inclusive digital education. It proposes guidance and action that Member States can pursue to implement a whole-of-government and multi-stakeholder approach as well as a culture of bottom-up innovation and digitalisation led by education and training staff.
Improving digital skills teaching
The second common challenge identified relates to the varying levels of digital skills within different segments of the population, and the ability of national education and training systems to address these differences. The proposal for a “Council Recommendation on improving the provision of digital skills in education and training” tackles each level of education and training. It calls on Member States to start early by providing digital skills in a coherent way through all levels of education and training. This can be ensured by establishing incremental objectives and setting up targeted interventions for specific ‘priority or hard-to-reach groups’. The proposal calls on Member States to support high quality informatics in schools, to mainstream the development of digital skills for adults, and to address shortages in information technology professions by adopting inclusive strategies.
The Commission stands ready to support the implementation of both proposals by facilitating mutual learning and exchanges among Member States and all relevant stakeholders through EU instruments, such as the Technical Support Instrument. The Commission also promotes digital education and skills through cooperation within the European Digital Education Hub and through EU funding, such as Erasmus+ and the Digital Europe Programme, the Just Transition Fund, the European Regional Development Fund, the European Social Fund Plus and the Recovery and Resilience Facility, Horizon Europe, and NDICI-Global Europe.
Pilot for a European Digital Skills Certificate
A key action by the Commission will be facilitating the recognition of certification of digital skills. To this end, the Commission will run a pilot project of the European Digital Skills Certificate together with several Member States. The certificate aims to enhance the trust in and acceptance of digital skills certification across the EU. This will help people have their digital skills recognised widely, quickly and easily by employers, training providers and more. The results of the pilot will be presented as part of a feasibility study on the European Digital Skills Certificate towards year-end. The final European Digital Skills Certificate will be rolled out in 2024 based on the pilot’s outcomes and the study’s findings.
Next Steps
The Commission calls on Member States to swiftly adopt today’s proposals for two Council Recommendations.
Building on the successful Structured Dialogue and the group of national coordinators, the Commission will set up a High-Level Group on Digital Education and Skills to support the implementation of the two Recommendations.
Background
The two proposals presented today draw on the conclusions of the Structured Dialogue on digital education and skills, during which the Commission engaged with EU Member States throughout 2022. Through the Digital Decade the EU aims to ensure that 80% of adults have at least basic digital skills and that 20 million ICT specialists are in employment in the EU by 2030. The objective of the dialogue was to increase the commitment on digital education and skills and help accelerate efforts at EU level, so Europe can deliver on its 2030 targets in this area. The proposals are furthermore in line with the solidarity and inclusion key pillar of the European digital rights and principles stating that everyone should have access to the internet and to digital skills, with no one left behind.
The proposals deliver on the two strategic priorities of the Digital Education Action Plan: fostering the development of a high-performing digital education ecosystem and enhancing digital skills and competences for the digital transformation. The Action Plan calls for greater cooperation at European level on digital education to address the challenges and opportunities of the COVID-19 pandemic, and to present opportunities for the education and training community (teachers and students), policy makers, academia and researchers on national, EU and international level. It is a key enabler to realising the vision of achieving a European Education Area by 2025, and contributes to achieving the goals of the European Skills Agenda , the European Social Pillar Action Plan and the 2030 Digital Compass. By promoting and improving digital skills of Europeans, today’s package is also a key deliverable of the European Year of Skills.
The proposal builds on the analysis conducted by the Commission’s Joint Research Centre identifying the main lessons and trends that have emerged through the Structured Dialogue, the Call for Evidence and the Resilience and Recovery Plans by EU Member States.
Compliments of the European Commission.The post EU Commission calls for massive boost in enabling digital education and providing digital skills first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The European Commission has today adopted a proposal to adjust and further strengthen the EU’s existing bank crisis management and deposit insurance (CMDI) framework, with a focus on medium-sized and smaller banks.
The EU’s banking sector, which includes a strong crisis management framework, has become much more resilient in recent years. Financial institutions in the EU are well capitalised, highly liquid and closely supervised.
However, experience has shown that many failing medium-sized and smaller banks have been managed with solutions outside the resolution framework. This sometimes involved using taxpayers’ money instead of the bank’s required internal resources or private, industry-funded safety nets (deposit guarantee schemes and resolution funds).
Today’s proposal will enable authorities to organise the orderly market exit for a failing bank of any size and business model, with a broad range of tools. In particular, it will facilitate the use of industry-funded safety nets to shield depositors in banking crises, such as by transferring them from an ailing bank to a healthy one. Such use of safety nets must only be a complement to the banks’ internal loss absorption capacity, which remains the first line of defence.
Overall, this will further preserve financial stability, protect taxpayers and depositors, and support the real economy and its competitiveness.
The proposal has the following objectives:

Preserving financial stability and protecting taxpayers’ money

The proposal facilitates the use of deposit guarantee schemes in crisis situations to shield depositors (natural persons, businesses, public entities, etc.) from bearing losses, where this is necessary to avoid contagion to other banks and negative effects on the community and the economy. By relying on industry-funded safety nets (such as deposit guarantee schemes and resolution funds), the proposal also better protects taxpayers who do not have to step in to preserve financial stability. Deposit guarantee schemes can only be used for this purpose after banks have exhausted their internal loss absorption capacity, and only for banks that were already earmarked for resolution in the first place.

Shielding the real economy from the impact of bank failure

The proposed rules will allow authorities to fully exploit the many advantages of resolution as a key component of the crisis management toolbox. In contrast with liquidation, resolution can be less disruptive for clients as they keep access to their accounts, for example by being transferred to another bank. Moreover, the bank’s critical functions are preserved. This benefits the economy and society, more broadly.

Better protection for depositors

The level of coverage of €100,000 per depositor and bank, as set out in the Deposit Guarantee Scheme Directive, remains for all eligible EU depositors. However, today’s proposal harmonises further the standards of depositor protection across the EU. The new framework extends depositor protection to public entities (i.e. hospitals, schools, municipalities), as well as client money deposited in certain types of client funds (i.e. by investment companies, payment institutions, e-money institutions). The proposal includes additional measures to harmonise the protection of temporary high balances on bank accounts in excess of €100,000 linked to specific life events (such as inheritance or insurance indemnities).

Next steps
The legislative package will now be discussed by the European Parliament and Council.
Background
In its statement of 16 June 2022, the Eurogroup noted that the Banking Union remains incomplete and agreed, as an immediate step, that the work on the Banking Union should focus on strengthening the crisis management and deposit insurance framework, with the aim of completing the legislative work during this institutional cycle. Other important projects, such as the establishment of the third and outstanding pillar of the Banking Union – European Deposit Insurance Scheme (EDIS) – and further progress on market integration, would be re-assessed subsequently, after the CMDI reform.
In its latest report on the Banking Union, the European Parliament also supported the need for a review of the crisis management and deposit insurance framework to improve its functioning and predictability to manage bank failures.
Compliments of the European Commission.The post Banking Union: Commission proposes reform of bank crisis management and deposit insurance framework first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

The interconnectedness of the global financial system makes it possible that a cyber incident at one financial institution (or an incident at one of its third-party service providers) could have spill-over effects across borders and sectors.
Cyber incidents are rapidly growing in frequency and sophistication. At the same time, the cyber threat landscape is expanding amid digital transformation, increased dependencies on third-party service providers and geopolitical tensions.
Recognising that timely and accurate information on cyber incidents is crucial for effective incident response and recovery and promoting financial stability, the G20 asked the FSB to deliver a report on achieving greater convergence in cyber incident reporting (CIR).
Drawing from the FSB’s body of work on cyber, including engagement with external stakeholders, the report identifies commonalities in CIR frameworks and details practical issues associated with the collection of cyber incident information from FIs and the onward sharing between financial authorities. These practical issues include:

operational challenges arising from the process of reporting to multiple authorities;
setting appropriate and consistent qualitative and quantitative criteria/thresholds for reporting;
establishing an appropriate culture to report incidents in a timely manner;
inconsistent definitions and taxonomy related to cyber security;
establishing a secure mechanism to communicate on cyber incidents; and
legal or confidentiality constraints in sharing information with authorities across borders and sectors.

This report sets out 16 recommendations to address these issues with a view to promote best practices in cyber incident reporting.
Recommendations mapped to identified issues and challenges

Identified issues and challenges:
Operational challenges
Setting reporting criteria
Culture of timely reporting
Early assessment challenges
Secure communications
Cross-border and cross-sectoral issues

A
Design of CIR Approach

1
Establish and maintain objectives for CIR
Significant

2
Explore greater convergence of CIR frameworks
Moderate

Significant
Significant

3
Adopt common data requirements and reporting formats
Profound

Moderate
Moderate

4
Implement phased and incremental reporting requirements
Minor

Significant
Significant

5
Select appropriate incident reporting triggers

Profound

6
Calibrate initial reporting windows

Profound

7
Provide sufficient details to minimise interpretation risk

Profound

8
Promote timely reporting under materiality-based triggers

Significant
Moderate

B
Supervisory activities and collaboration between authorities

9
Review the effectiveness of CIR and CIRR processes

Significant
Minor

10
Conduct ad-hoc data collection

Moderate

11
Address impediments to cross-border information sharing

Profound

C
Industry engagement

12
Foster mutual understanding of benefits of reporting
Moderate

Profound
Minor

13
Provide guidance on effective CIR communication

Moderate

D
Capability Development (individual and shared)

14
Maintain response capabilities which support CIR

Significant
Moderate

15
Pool knowledge to identify related cyber events and cyber incidents

Significant
Significant

16
Protect sensitive information
Significant

Significant

Compliments of the Financial Stability Board.The post FSB | Recommendations to Achieve Greater Convergence in Cyber Incident Reporting: Final Report first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Tomorrow, the European Centre for Algorithmic Transparency (ECAT) will be officially inaugurated by the Commission’s Joint Research Centre in Seville, Spain. The inauguration will be marked with a launch event that will be broadcast here.
The event brings together representatives from EU institutions, academia, civil society and industry to discuss the main challenges and the importance at a societal level of having oversight of how algorithmic systems are used. Following a video message by Commissioner for the Internal Market Thierry Breton, the audience will dive into the current and planned work of ECAT, including a preliminary showcase of its potential through live demos.
The role of ECAT under the Digital Services Act
The Digital Services Act imposes risk management requirements for companies designated by the European Commission as Very Large Online Platforms and Very Large Online Search Engines. Under this framework, designated platforms will have to identify, analyse and mitigate a wide array of systemic risks on their platforms, ranging from how illegal content and disinformation can be amplified through their services, to the impact on the freedom of expression or media freedom. Similarly, specific risks around gender-based violence online and the protection of minors online and their mental health must be assessed and mitigated. The risk mitigation plans of designated platforms’ and search engines will be subject to an independent audit and oversight by the European Commission.
ECAT will provide the Commission with in-house technical and scientific expertise to ensure that algorithmic systems used by the Very Large Online Platforms and Very Large Online Search Engines comply with the risk management, mitigation and transparency requirements in the DSA. This includes, amongst other tasks, the performance of technical analyses and evaluations of algorithms. An interdisciplinary team of data scientists, AI experts, social scientists and legal experts will combine their expertise to assess their functioning and propose best practices to mitigate their impact. This will be crucial to ensure the thorough analysis of the transparency reports and risk self-assessment submitted by the designated companies, and to carry out inspections to their systems whenever required by the Commission.
This mission could not be attained without proper research and foresight capacity, which are also inherent to ECAT’s approach. JRC researchers will build on and further advance their longstanding expertise in the field of Artificial Intelligence (AI), which has already been instrumental in the preparation of other milestone pieces of regulation like the AI Act, the Coordinated Plan on AI and its 2021 review. ECAT researchers will not only focus on identifying and addressing systemic risks stemming from Very Large Online Platforms and Very Large Online Search Engines, but also investigate the long-term societal impact of algorithms.
Background
On 15 December 2020, the Commission made the proposal on the DSA together with the proposal on the Digital Markets Act (DMA) as a comprehensive framework to ensure a safer, more fair digital space for all. Following the political agreement reached by the EU co-legislators in April 2022, the DSA entered into force on 16 November 2022. The deadline for platforms and search engines to publish the number of their monthly active users was on 17 February 2023. The Commission is now in process of analysing the publications with a view to designating Very Large Online Platforms and Very Large Online Search Engines, which will have four months from the designation to comply with all DSA obligations and in particular to submit their first risk assessment. By 17 February 2024 the DSA will apply to all intermediary services; by the same date Member States are required to appoint Digital Services Coordinators.
The DSA applies to all digital services that connect consumers to goods, services, or content. It creates comprehensive new obligations for online platforms to reduce harms and counter risks online, introduces strong protections for users’ rights online, and places digital platforms under a unique new transparency and accountability framework. Designed as a single, uniform set of rules for the EU, these rules will give users new protections and businesses legal certainty across the whole single market. The DSA is a first-of-a-kind regulatory toolbox globally and sets an international benchmark for a regulatory approach to online intermediaries.
Compliments of the European Commission.The post DSA enforcement: EU Commission launches European Centre for Algorithmic Transparency first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Statement by Christine Lagarde, President of the ECB, at the forty-seventh meeting of the International Monetary and Financial Committee | IMF Spring Meetings, 14 April 2023 |
Introduction
Since the October meeting, the global economic outlook has improved on the back of a gradual easing of global supply bottlenecks, declining energy prices, and the recovery of the Chinese economy following the lifting of pandemic-related containment measures. Global inflation has also been declining since it peaked in summer 2022, supported by easing supply constraints, as well as by the tightening of monetary policy among advanced economies. However, the recovery prospects for the global economy remain fragile amid continued uncertainty, fuelled by Russia’s unjustified war against Ukraine, and the possibility that pressures in global energy and food markets may reappear, leading to renewed price spikes and higher inflation. Resilient labour markets and strong wage growth, especially in advanced economies, suggest that underlying inflationary pressures remain strong. At the same time, other factors that may accelerate disinflation include: persistently elevated financial market tensions, falling energy prices, and a weakening of demand, owing also in part to a stronger deceleration of bank credit or a stronger than projected transmission of monetary policy.
As inflation is projected to remain too high for too long, the Governing Council of the ECB decided in March to raise the key ECB interest rates by 50 basis points, bringing the total increase since July 2022 to 350 basis points. These increases underline our determination to ensure the timely return of inflation to our two per cent medium-term target. The elevated level of uncertainty reinforces the importance of a data-dependant approach to our policy rate decisions, which will be determined by our assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The asset purchase programme portfolio has been declining at a measured and predictable pace since March 2023, as the Eurosystem is no longer reinvesting all of the principal payments from maturing securities. Regarding the pandemic emergency purchase programme, the Governing Council intends to reinvest all principal payments from maturing securities purchased under it until at least the end of 2024 and will continue applying flexibility in reinvesting redemptions.
We are monitoring current market tensions closely and stand ready to respond as necessary to preserve price stability and financial stability in the euro area. The euro area banking sector is resilient, with strong capital and liquidity positions. In any case, our policy toolkit fully equips us to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy.
Economic activity
Growth in euro area GDP slowed progressively over the course of last year and stagnated in the fourth quarter. Employment growth also slowed in 2022, but remained resilient in the fourth quarter despite the moderation in economic activity, while the unemployment rate remained at a record low level. Survey data into the first quarter of this year suggested some improvement in activity and confidence in the first quarter of 2023. Under the baseline scenario in the ECB staff projections (which were finalised before the emergence of financial market tensions in mid-March 2023), the euro area economy looks set to recover over the coming quarters as the labour market remains strong, supply bottlenecks are resolved, and inflation moderates.
Risks to the growth outlook are tilted to the downside. Persistently elevated financial market tensions could tighten broader credit conditions more strongly than expected and dampen confidence. Russia’s unjustified war against Ukraine and its people continues to be a significant downside risk to the economy and could again push up the costs of energy and food. Euro area growth could also be dragged down if the world economy weakened more sharply than expected. However, if companies can adapt more quickly to the challenging international environment, this, coupled with the fading-out of the energy shock, could support higher growth than currently expected.
Government support measures to shield the economy from the impact of high energy prices should be temporary, targeted, and tailored to preserving incentives to consume less energy. As energy prices fall and risks around the energy supply recede, it is important to start rolling back these measures promptly and concertedly. Falling short of these principles can drive up medium-term inflationary pressures, which would call for a stronger monetary policy response. Moreover, fiscal policies should be oriented towards making economies more productive and gradually reducing high public debt. Finally, countries should implement structural policies for intensifying their efforts to green and digitalise their economies.
Inflation
Euro area headline inflation declined from its October peak, reflecting a drop in energy inflation. Downward base effects, an easing of energy commodity prices, and the impact of government measures to shield consumers from high energy prices all contributed to this decline. By contrast, food and core inflation rates continued to rise, partly as a result of the past surge in energy and other input costs still feeding through to consumer prices. Pent-up demand related to the reopening of the economy and the lagged impact of supply bottlenecks also continue to push prices up. At the same time, employees demanding compensation for the loss in purchasing power amid tight labour markets has translated into higher wage growth, while many firms in sectors facing constrained supply and resurgent demand raised their profit margins.
We expect euro area inflation to continue to fall, as lagged price pressures fade out and tighter monetary policy increasingly dampens demand. However, historically high wage growth, related to tight labour markets and compensation for high inflation, will support core inflation over the projection horizon, as it gradually returns to rates around our target. This outlook remains surrounded by considerable uncertainty, with both upside and downside risks. Stronger than expected pipeline pressures or higher than anticipated increases in wages or profits could drive up inflation, while financial market tensions and falling energy prices could lead to faster disinflation. At the same time, most measures of longer-term inflation expectations currently stand at around two per cent, although they warrant continued monitoring.
Euro area banking sector, non-bank financial sector and financial stability
Euro area banks remain resilient in the current market environment thanks to strong capital and liquidity positions. Since the start of the ECB’s policy rate hiking cycle, euro area bank profitability has been boosted by higher interest margins, while the change in impairments and provisions has been rather muted so far. However, in the current environment of tightening financing conditions including for banks, credit risks have increased, and lending dynamics have substantially weakened, which may weigh on future bank profitability.
The decrease in bank lending to firms has, in general, not been offset by an increased recourse of firms to market-based financing, despite a bout of corporate bond issuance in the fourth quarter of 2022. Looking ahead, the decline in the asset purchase programme portfolio will increase the share of debt issuance that needs to be absorbed by investors. Based on their past behaviour, investment funds appear able to absorb part of such an increase. At the same time, in spite of some reduction in exposure to higher-risk assets, structural vulnerabilities in the non-bank financial sector remain elevated. Risks in that sector may arise especially from liquidity mismatch and leverage, which could adversely affect market conditions should risks materialise. Priority should be given to policies that help build resilience by reducing liquidity mismatch, mitigating risk from non-bank financial sector leverage, and enhancing liquidity preparedness in the broader non-bank financial sector.
International support for Ukraine and most vulnerable countries
We welcome the IMF’s continued support for Ukraine, including the recently approved fully fledged lending arrangement. Together with strong international support, the arrangement will be essential for addressing Ukraine’s immediate financial needs and in catalysing additional financial assistance. We note that all adjustments to the IMF’s lending policies and toolkit are uniformly applicable to those meeting the relevant criteria from the Fund’s broad membership.
In view of rising debt vulnerabilities, support for vulnerable countries remains high on the international agenda. We welcome the first successful conclusion of debt restructuring under the G20-Paris Club Common Framework last year and encourage debt treatments of other applicant countries to be finalised promptly. Efficient creditor coordination and debt transparency remain key.
We note strong demand for Resilience and Sustainability Trust (RST) financing, following its successful launch in late 2022, and welcome the good progress achieved. Initiatives to ensure the resource adequacy of the RST and the Poverty Reduction and Growth Trust should maintain the reserve asset character of claims on the loan and deposit accounts of these trusts. This is essential for contributions made by EU national central banks. However, we note that the channelling of special drawing rights by EU national central banks to multilateral development banks or individual countries would not be compatible with the EU’s legal framework.
Supporting international cooperation and strengthening the global economy
Recent global shocks and geopolitical tensions have advanced the debate about reconfiguring global supply chains. While the increased resilience associated with less complex supply chains is desirable, a less integrated world economy also entails costs. It weakens the diversification of global production and, in particular, the efficient allocation of resources globally, which has an adverse impact on welfare across the world. Geopolitical fragmentation may also affect the global economy via financial channels. The availability of external financing may be impeded, and lower foreign direct investment would hinder the diffusion of technology and thus productivity growth.
All of these developments require our immediate attention; however, we are not losing sight of longer-term challenges and are keeping up our efforts to address the existential crisis of climate change. As part of our action plan to incorporate climate change considerations in our monetary policy framework, we decided to tilt corporate bond holdings towards issuers with better climate performance, through the reinvestment of redemptions starting in October 2022. Our climate-related financial disclosures showed last month that this effort was helping reduce the carbon footprint of our corporate sector portfolios. In addition, we are adjusting the collateral framework, introducing climate-related disclosure requirements, and enhancing risk management practices. Recently, we have also issued statistical indicators for climate-related analysis. Moreover, tackling climate-related and environmental risks is one of the ECB’s key supervisory priorities for 2023-25. Supervisors have set institution-specific remediation timelines for achieving full alignment with supervisory expectations by the end of 2024 and will follow up on the deficiencies identified in stress tests and thematic reviews performed in 2022.
The investigation phase of the digital euro project is on track. In the autumn, we expect to decide on the next project phase, in which the appropriate technical solutions and business arrangements necessary to provide a digital euro would be developed and tested. While a digital euro would focus first on the domestic retail payments market in Europe, we are already discussing at the international level the potential of cross-currency and cross-border payments made in retail central bank digital currency (CBDC). There is agreement that CBDC should eventually contribute to improving cross-border payments. As global work on CBDC accelerates, international cooperation in this field will become even more important.
Compliments of the European Central Bank.The post ECB | Christine Lagarde: IMFC Statement first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Governor Lisa D. Cook at the 2023 Midwest Economics Association 87th Annual Meeting, Cleveland, Ohio | March 31, 2023 |
Thanks to President Kasey Buckles and the program committee for affording me the opportunity to give the C. Woody Thompson Memorial Lecture. It is a pleasure to be back in the Midwest. Before joining the Federal Reserve, I taught economics at Michigan State University, which I chose for its bird’s-eye view of the industrial Midwest. Big 10 rivalries aside, Ohio and Michigan share quite a lot, including many of the same economic concerns and interests.
Today I would like to outline my views on the trajectory of U.S. economic developments and what they imply for the appropriate path of monetary policy.1
This is an especially challenging time to be an economic analyst or policymaker. Recent developments in the banking sector have added to existing uncertainties about recovery from the pandemic shock and developments abroad. In that context, the economic and policy outlook needs to balance data dependence with forward-looking analysis. Recent data show greater momentum in inflation and economic activity, but recent banking developments may suggest greater headwinds for financial conditions and the economy going forward.
The U.S. economy
Assessing the current state of the economy requires revisiting the pandemic and its economic repercussions. From the perspective of the NBER Business Cycle Dating Committee, the 2020 recession was unprecedented. Of the 35 recessions since 1858, only 8 spanned months in the single digits from peak to trough. The one in 2020 was severe, but it spanned only two months from peak to trough and was the shortest recession on record.
However, the pandemic’s economic effects reverberated through 2021 and 2022. Inflation surged during the recovery amid pandemic-induced disruptions to supply, while demand for goods was boosted by a shift away from in-person services, and overall demand was supported by monetary and fiscal policy. Russia’s invasion of Ukraine in February 2022 was a further supply shock to the global economy, driving up prices for energy and other commodities. Last June, U.S. inflation hit a peak of 7 percent as measured by the 12-month change in the personal consumption expenditures (PCE) index.
In response, the Federal Reserve has been using its monetary policy tools to restore price stability by bringing demand into line with still-constrained supply. Over the past year, we have raised the federal funds rate nearly 5 percentage points and have begun to reduce the size of our balance sheet.
As a result, financial conditions have tightened significantly. Borrowing costs have risen, equity prices have declined, and the dollar has appreciated on net.
Interest-sensitive sectors of the economy have slowed. Residential investment subtracted nearly 1 percentage point from gross domestic product growth last year, as housing demand was curtailed by higher mortgage rates. Business fixed investment held up last year but appears to have slowed more recently. Manufacturing activity has slowed in response to tighter financing conditions, the stronger dollar, and some retracement of the pandemic-related shift from services to goods.
As energy prices have moderated and supply disruptions have eased, inflation has started to abate. However, the process of returning inflation to 2 percent has a long way to go and is likely to be uneven and bumpy.
Indeed, the inflation picture is less favorable than it appeared earlier this year. Part of the encouraging disinflation initially observed in the fourth quarter of last year was revised away, while inflation over the first two months of this year came in high.
The inflation data show some persistence. The 3-, 6-, and 12-month changes in February prices for the core PCE index—excluding food and energy—are all around 4-1/2 to 5 percent. Housing services inflation continues at a rapid monthly clip, contributing much more to inflation than it did before the pandemic. Inflation in non-housing core services remains sticky at elevated levels. Even core goods prices rose in January and February, after three months of declines, highlighting the uneven nature of the disinflationary process.
Even so, several factors are likely to contribute to disinflation. Long-term inflation expectations remain well anchored, and shorter-term expectations have retraced much of last year’s rise.2 Rent increases on new leases have slowed sharply over the past six months, which should begin to pull down measured housing-services inflation over the course of this year. Moreover, significant supply of multifamily housing is coming online, which should take further pressure off the rental market.
Core goods inflation should continue converging toward its pre-pandemic trend of slightly negative numbers, as supply chains continue to heal and demand for goods continues to slow. Rebounding automobile production should help prices for new and used cars continue to moderate as cars become more available. More broadly in the economy, profit margins may narrow as buyers become more price sensitive and pull back on spending. Earnings calls from nonfinancial corporations already show increasing awareness of resistance to price increases.
Non-housing core services inflation is a broad category that accounts for more than half of the core PCE index. Inflation in that category looks quite persistent amid strong post-pandemic demand for travel, dining out, and medical care. Disinflation in these services will likely require some combination of slowing demand and further recovery in supply.
One potential avenue of disinflation is that a decline in prices for some goods may help lower related services prices. For instance, an eventual retreat in car prices may feed into lower prices for car insurance, repairs, and rentals, reversing some of their increases over the past two years.
Another potential source of disinflation is that wage growth has moderated somewhat, even as the labor market remains very strong by most measures. Payroll employment growth was extraordinarily robust in January and February, unemployment remains near record lows, and job openings remain very elevated.
Nonetheless, there are some signs that the labor market is softening at the margin. The Federal Reserve Board staff’s measure of private employment using data from the payroll processing firm ADP suggests that job gains slowed in January and February. Job postings from Indeed show a noticeable decline. And the quits rate has retraced more than half of its pandemic-era rise, falling steadily from a 3 percent peak in late 2021 to 2.5 percent in January. That could be significant, as much of the surge in wage growth a year ago may have been driven by outsized wage gains of those changing jobs and by employers raising wages to retain existing workers.
This wage moderation may partly reflect some improvement in labor supply. Labor force participation edged up to 62.5 percent in the most recent data. Prime-age participation is now back to pre-pandemic levels. In addition, new estimates show higher population growth over the past year amid a rebound in immigration.
Over time, there is reason to believe that rising productivity also may aid supply. I see three potential sources of rising productivity growth.
First, increased innovation associated with the spurt of new businesses since the onset of the pandemic may raise productivity. Second, current labor shortages are spurring increased investment in automation that should boost labor productivity over time. Finally, a recent paper by David Autor, Arin Dube, and Annie McGrew suggests another way that the strong labor market could boost productivity.3 They find that faster wage gains for lower-paid workers have come from job-switching to higher-wage firms, which may also be more-productive firms.
Currently, however, supply in the economy continues to be insufficient to meet still-robust demand. Importantly, consumer spending has gained steam this year after slowing late last year. Consumer spending is being supported by robust growth in households’ real disposable income amid strong employment growth. Strong household balance sheets have also supported spending, although lower-income consumers appear to have mostly exhausted their excess savings.
Altogether, the incoming data would suggest a somewhat higher inflation rate for this year and stronger economic growth. However, I am closely watching developments in the banking sector, which have the potential to tighten credit conditions and counteract some of that momentum.
The U.S. banking system is sound and resilient. The Federal Reserve, working with other agencies, has taken decisive actions to protect the U.S. economy and to strengthen public confidence in our banking system. We will continue to closely monitor conditions in the banking system and are prepared to use all our tools, as needed, to keep the system safe and sound.
At the same time, I am monitoring overall financial conditions in the U.S. economy, including indicators of credit availability. I am well aware of the extensive literature linking monetary policy, credit conditions, economic activity, and inflation. Over the past 15 years, that literature came to be roughly a quarter of the syllabus in the macroeconomics class that I taught.
A particular focus over my career, including in my December NBER paper with Matt Marx and Emmanuel Yimfor, is the importance of smaller financial institutions in lending to small and medium-sized firms.4 Those smaller banks over time have developed relevant expertise in small-business lending and have worked to maintain relationships with small firms. Thus, I am attentive to whether recent banking developments will restrain credit to small businesses, which could slow innovation and growth in potential output over time.
Data dependence and monetary policy
Turning to monetary policy, I have said frequently that my approach to policymaking in uncertain times is to be data dependent. And, like everyone, my own research and experiences shape my views on setting that policy. I was at the Council of Economic Advisers during the euro-area crisis, and my work on emerging economies—particularly Russia and some African economies—has taught me how difficult it can be to forecast in highly uncertain environments.
Taking all these lessons into account, I approach all our monetary policy discussions with the same mindset:

Be prepared to adjust the outlook based on incoming data while being humble about our ability to draw firm conclusions and thus not overreacting to a few data points.
Seek out useful data sources, including high-frequency data that may better capture evolving economic developments.
And follow a risk-management approach that considers not only the expected outcomes, but also various risks to the outlook.

Of course, it is tempting to follow the old adage of “never make predictions, especially about the future.” But ultimately, policymaking must be forward-looking, which means relying, at least in part, on forecasts. The challenge is to figure out which models apply. For example, when I began studying banks in the post-Soviet era for my dissertation, I found that the standard models used in normal times and for mature, industrialized economies are less useful in highly uncertain environments.
Since my first FOMC meeting last June, my data-dependent, risk-management approach has led me to support the Fed’s response of frontloading monetary policy tightening to bring inflation under control.
After the swift policy response of the past year, monetary policy is now in restrictive territory. For instance, real interest rates are positive across the yield curve.5
Going forward, I am weighing the implications of stronger momentum in the economy against potential headwinds from recent developments. On the one hand, if tighter financing conditions restrain the economy, the appropriate path of the federal funds rate may be lower than it would be in their absence. On the other hand, if data show continued strength in the economy and slower disinflation, we may have more work to do.
The FOMC has been raising rates in smaller increments as we seek a sufficiently restrictive monetary policy stance to return inflation to 2 percent over time. By taking smaller steps, we can observe economic and financial conditions and consider the cumulative effects of our policy actions.
For the econometricians, this approach is similar to the iterative procedure in maximum likelihood estimation, where large early steps are followed by smaller steps as you approach the local optimum.
In its March policy statement, the FOMC dialed back its forward guidance on the path of the policy rate.6 We shifted from anticipating “ongoing increases” to saying that “some additional policy firming may be appropriate.” I think this communication is appropriate as we seek to calibrate monetary policy to be sufficiently restrictive amid uncertainty about the economic outlook.
Yet what should not be uncertain is our commitment to our dual-mandate goals of maximum employment and price stability. We will do what it takes to bring inflation back to our 2 percent target over time, which will lay the foundation for sustainable strength in the labor market and the U.S. economy.

1. These views are my own and do not necessarily reflect those of the Federal Reserve Board or the Federal Open Market Committee. Return to text

2. As shown, for example, in surveys from the University of Michigan and the Federal Reserve Bank of New York. Return to text

3. See David Autor, Arindrajit Dube, and Annie McGrew (2023), “The Unexpected Compression: Competition at Work in the Low Wage Labor Market,” NBER Working Paper Series 31010 (Cambridge, Mass.: National Bureau of Economic Research, March). Return to text

4. See Lisa D. Cook, Matt Marx, and Emmanuel Yimfor (2022), “Funding Black High-Growth Startups,” NBER Working Paper Series 30682 (Cambridge, Mass.: National Bureau of Economic Research, November). Return to text

5. These real interest rates are based on prices from Treasury Inflation-Protected Securities (TIPS) and inflation swap markets, as well as survey expectations. Return to text

6. See Board of Governors of the Federal Reserve System (2023), “Federal Reserve Issues FOMC Statement,” press release, March 22. Return to text

Compliments of the U.S. Federal Reserve.The post U.S. FED | Speech by Governor Cook on the U.S. economic outlook and monetary policy first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Sanctions and voluntary boycotts have forced Russia to change its international trade since its invasion of Ukraine. The country has reoriented towards the east, away from Europe. This ECB Blog post sheds light on these shifts. It is the third entry in a series about the economic effects of the war.

Russia’s invasion of Ukraine prompted the EU and its partners[2] to impose wide-ranging sanctions on Russia, including banning exports of certain types of machinery and transport equipment to the country.[3] Many European firms and households also scaled down or entirely froze their trade with Russian firms. As the war dragged on, the EU and G7 also imposed bans and price caps on seaborne imports of Russian oil. The result of these actions has been a fundamental change in Russia’s trade relations with the EU and the rest of the world.[4]
Russia was an important euro area trade partner before the war. In 2021, it was the world’s 11th largest economy[5] and accounted for around 3% of goods exported to the euro area and 5% of goods imported from there. It was particularly important in certain strategic sectors: Russia accounted for around a quarter of EU crude oil imports, close to 40% of EU natural gas imports and almost half of EU coal imports. The country’s role in global markets for energy, raw materials and metal industries also make it important at the start of the production process for global value chains, which also affects trade with the euro area via third countries.[6]
As a result of the war and the sanctions, trade between the euro area and Russia has plunged dramatically. It is now at roughly half of pre-war levels (Chart 1). Euro area exports to Russia fell particularly quickly. In the first months of the war, this reflected declines in exports of both sanctioned and non-sanctioned categories of goods. Since then, however, exports of non-sanctioned categories of goods have gone back towards pre-invasion levels,[7] while exports of sanctioned categories of goods remain low.[8] Imports from Russia fell more gradually. Before the war the euro area mainly imported energy from Russia. Those imports have fallen as the EU progressively banned imports of coal (from August 2022), then crude oil (from December 2022) and, most recently, refined oil products (from February 2023).
Russia has also gradually reduced the flows of natural gas to Europe so that, by February 2023, gas imports from Russia to Europe were 90% lower than their historical average.[9] Europe has replaced gas from Russia with pipeline gas from Norway, Algeria and Azerbaijan, while also substantially increasing its imports of liquified natural gas (LNG), which is mainly transported by sea. Russia’s market power in European energy markets has consequently diminished substantially.

Chart 1
Euro area trade with Russia
(Index, February 2022 = 100)

Sources: Eurostat and ECB staff calculations.
Note: Exports from the euro area to Russia and imports to the euro area from Russia measured in volumes, i.e. adjusted for price developments. Last observation: December 2022.

International sanctions have prompted a significant shift in Russia’s trade patterns. At first the aggregate value of Russia’s imports almost halved as all of its trading partners, not just sanctioning countries, reduced their exports. However, those countries that are not imposing sanctions have since increased their exports to Russia again. By the start of 2023 the value of Russia’s imports had risen almost back to pre-war levels (Chart 2).[10] Russia’s global trade has been significantly reorientated: it trade dependencies have shifted, and its suppliers are geographically much less diverse. As of January 2023, China alone provides almost half of Russia’s goods imports.[11]
While Russia has now largely restructured its supply chains and its goods imports have recovered, what remains unclear is whether the new imports are of the same quality as those that were lost. Russian industry relied heavily on high-tech goods from western trading partners before the war. The sanctions imposed on these products have meant that they are either unavailable, have been replaced by low-quality substitutes, or have become much more expensive. This setback will likely weigh on productivity growth in Russia, reducing the economy’s long-term growth prospects.[12]

Chart 2
Russia has become more dependent on China and other eastern countries for its imports

Sources: Trade Data Monitor, national statistical authorities and ECB staff calculations.
Notes: Based on customs data from 51 of Russia’s main trading partners

Russia’s export patterns have also changed substantially. The country still relies heavily on energy exports. Indeed, the volume of Russian exports of oil, its largest export commodity, has actually increased despite EU and G7 sanctions targeting it. This is because Russia has redirected flows from Europe to China and Türkiye as well as to new trading partners in India, Africa and the Middle East. This larger volume of oil is, however, being offered at a significant discount. Urals grade oil, which is Russia’s main export grade to Europe, traded at USD 48 per barrel on average in February, well below the USD 83 average price per barrel of Brent crude, the global benchmark. Russia’s gas exports by pipeline have proved harder to redirect, as they require extensive infrastructure to export to more distant destinations. Having shut its pipelines to Europe, Russia has only been partially able to offset gas exports by increasing pipeline flows to China and selling more LNG to the world market. Overall, Russian gas exports in 2022 were around 25% lower than in 2021.
In short, the sanctions and voluntary boycotts by European firms in response to Russia’s invasion of Ukraine have led to a considerable diversion of Russian trade with the euro area. This has made Russia more dependent on non-sanctioning trade partners, making the country’s economy more fragile overall. It has also been forced to offer discounts on its commodity exports to attract new customers to replace the euro area. The nature of Russian goods trade also means that re-directing its supply chains will likely lead to a squeeze on productivity growth in the country’s economy. The EU has also had to divert trade as a result of the war, in particular commodities trade away from Russia and thus diversifying its external energy dependency.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.
Authors:

By Demosthenes Ioannou, Laura Lebastard, Adrian Schmith, Isabel Vansteenkiste [1]

Compliments of the European Central Bank.

We would like to thank Martina Di Sano and Simone Maso for their support in preparing this blog post.

These partners include Australia, Canada, Japan, New Zealand, Norway, Singapore, South Korea, Switzerland, Taiwan, the United States and the United Kingdom.

Since the invasion, the EU has issued nine packages of sanctions against Russia, including sanctions on individuals and restrictions on the media, transport and financial sectors as well as on trade. Initial trade measures targeted goods and products that serve to enhance Russia’s military, transport and technological sectors. More recent restrictions focused on luxury goods (both imported and exported) and other revenue-generating goods exported by Russia, including coal and oil.

For a broader discussion of geopolitical developments and EU policies, see Ioannou, D., and Pérez, J. J. (co-leads) (2023), “The EU’s Open Strategic Autonomy from a central banking perspective. Challenges to the monetary policy landscape from a changing geopolitical environment”, European Central Bank Occasional Paper Series, No 311, International Relations Committee Workstream on Open Strategic Autonomy, March.

As measured by GDP at market exchange rates.

Indirect EU imports from Russia were about three times as high as direct imports in 2018, according to OECD’s Trade in Value Added database 2021.

Non-sanctioned goods represented about 35% of euro area aggregate exports to Russia before the war.

The granularity of data on goods volumes does not allow a differentiation between sanctioned and non-sanctioning goods at the product level. Instead, we differentiate between broader types of goods that are predominantly subject to sanctions (e.g. transport equipment) and types that are left mainly unsanctioned.

This in turn led European energy import prices to surge. See the ECB Blog post by Arce, O., Koester, G. and Nickel, C. (2023), “One year since Russia’s invasion of Ukraine – the effects on euro area inflation”.

See also Borin, A., Conteduca, F. P. and Mancini, M. (2022), “The Real-time Impact of the War on Russian Imports: A Synthetic Control Method Approach” for an account of developments in Russia’s trade patterns since the start of the war.

According to ECB Staff estimates based on customs data from 51 of Russia’s main trading partners.

See, for example, The World Bank “Global Economic Prospects – January 2023” or the Bank of Finland Institute for Emerging Economies “BOFIT Forecast for Russia 2023–2024: An unprecedented fog of uncertainty”.

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