Following its stress test earlier this year, the Federal Reserve Board on Wednesday announced final individual capital requirements for all large banks, effective on October 1.
Large bank capital requirements are informed by the Board’s stress test results, which provide a risk-sensitive and forward-looking assessment of capital needs. The table shows each bank’s common equity tier 1 capital requirement, which is made up of several components, including:

The minimum capital requirement, which is the same for each bank and is 4.5 percent;
The stress capital buffer requirement, which is based in part on the stress test results and is at least 2.5 percent; and
If applicable, a capital surcharge for the largest and most complex banks, which is updated in the first quarter of each year to account for the overall systemic risk of each of these banks.

If a bank’s capital dips below its total requirement announced today, the bank is subject to automatic restrictions on both capital distributions and discretionary bonus payments.
Also today, the Board announced that it had modified the stress capital buffer requirement for Goldman Sachs, after the firm’s request for reconsideration. Based on an analysis of additional information presented by the firm in its request, the Board determined it would be appropriate to adjust the treatment of particular historical expenses incurred by the bank in the stress testing models’ input data, due to the non-recurring nature of those expenses. As a result, the bank’s stress capital buffer requirement has been adjusted to 6.2 percent from a preliminary 6.4 percent.
The Board is focused on continuously improving the stress testing framework. To that end, the Board will analyze whether to revise regulatory reporting forms to better capture these types of data and to explore possible refinements to certain model components.
 
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New governors in Bosnia and Herzegovina and Papua New Guinea lifted the share of central banks with women leaders to 16 percent
Women are leading more central banks than ever before, thanks to appointments in the past year, but recent gains still leave the share of female governors far short of parity.
The number of women in governor roles rose to 29 this year from 23 last year, though that left the share of female leaders at just 16 percent of the world’s 185 central banks, according to an April report by the Official Monetary and Financial Institutions Forum. Greater gender balance in senior positions may help increase the diversity of thought and checks and balances, in turn contributing to increased economic and financial stability and improved performance, IMF research shows.
Appointments this year in Bosnia and Herzegovina and Papua New Guinea are examples of how smaller economies are driving more progress on gender balance, according to OMFIF, a London-based think tank for monetary, economic and investment issues.
This year’s rise was the biggest gain in more than a decade of surveys, but the Chart of the Week shows how central banks still have much room to make progress toward greater parity in the ranks of top policymakers steering the global economy.

The tally adds to evidence of the struggle of women at central banks as well as in the economics discipline, where they remain underrepresented even after steady gains.
A first-of-its-kind IMF survey of the European Central Bank and its Group of Seven counterparts showed last year that fewer than half of employees at those institutions are women, but on average only a third of women are economists or managers. This survey underscores how policies to eliminate gender gaps have been only partially successful.
ECB Executive Board member Isabel Schnabel has cited a substantial gender imbalance in economics—one that the institution is determined to change among its own staff. Schnabel noted in a 2020 speech that the barriers aren’t insurmountable, and that mentoring opportunities and ensuring childcare can help narrow gender imbalances.
The latest additions to the list of countries naming a woman as central bank chief came in January, when Jasmina Selimović began a six-year term in Bosnia and Herzegovina and Elizabeth Genia was appointed to the top job after serving as acting governor. Last year, Michele Bullock became the first woman to lead the Reserve Bank of Australia.
Cambodia, Georgia, Moldova and Montenegro also appointed women as the heads of their monetary authorities last year, according to OMFIF’s 2024 gender balance index.
 
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NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data today released the July 2024 SCE Labor Market Survey, which shows a sharp increase in the proportion of job seekers compared to a year ago. Satisfaction with wage compensation as well as with nonwage benefits and promotion opportunities at respondents’ current jobs all deteriorated. The average expected likelihood of receiving an offer in the next four months increased compared to a year ago, while the average expected likelihood of becoming unemployed in the next four months reached a series high. The average expected wage offer (conditional on receiving one) declined year-over-year, while the average reservation wage (the lowest wage at which respondents would be willing to accept a new job) increased year-over-year but retreated slightly from a series high recorded in March 2024.
Experiences

Among those who were employed four months ago, 88% were still with the same employer, a series low since the start of the survey and down from 91.4% in July 2023. The rate of transitioning to a different employer increased to 7.1%—the highest reading since the start of the survey—from 5.3% in July 2023. The increase compared to a year ago was primarily driven by women.
The proportion of individuals who reported searching for a job in the past four weeks increased to 28.4%—the highest level since March 2014—from 19.4% in July 2023. The increase was most pronounced among respondents older than age 45, those without a college degree, and those with an annual household income less than $60,000.
19.4% of individuals reported receiving at least one job offer in the past four months, essentially unchanged from July 2023. The average full-time offer wage received in the past four months decreased slightly to $68,905 from $69,475 in July 2023.
Satisfaction with wage compensation, nonwage benefits, and promotion opportunities at respondents’ current jobs all deteriorated relative to a year ago. Satisfaction with wage compensation at the current job fell to 56.7% from 59.9% in July 2023. Satisfaction with nonwage benefits fell to 56.3% from 64.9%. And satisfaction with promotion opportunities dropped to 44.2% from 53.5%. These declines were largest for women, respondents without a college degree and those with annual household incomes less than $60,000.

Expectations

The expected likelihood of moving to a new employer increased to 11.6% from 10.6% in July 2023, while the average expected likelihood of becoming unemployed rose to 4.4% from 3.9% in July 2023. The current reading is the highest since the series started in July 2014.
The average expected likelihood of receiving at least one job offer in the next four months increased to 22.2% from 18.7% in July 2023. The average expected likelihood of receiving multiple offers in the next four months rose to 25.4% from 20.6% in July 2023.
Conditional on expecting an offer, the average expected annual salary of job offers in the next four months declined to $65,272 from $67,416 in July 2023, though it remains significantly higher than pre-pandemic levels. The decline was broad-based across age and education groups.

The average reservation wage—the lowest wage respondents would be willing to accept for a new job—increased to $81,147 from $78,645 in July 2023, though it is down slightly from a series high of $81,822 in March 2024.
The average expected likelihood of working beyond age 62 increased to 48.3% from 47.7% in July 2023, and versus a series low of 45.8% in March 2024. The average expected likelihood of working beyond age 67 increased to 34.2% from 32% in July 2023, partially reversing the steady declining trend observed in the series since the onset of the pandemic.

Detailed results are available here.
 
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Blog post by Olly Bartrum | Fiscal rules have come under a range of criticism in recent years in the UK and elsewhere. In general, the argument of critics has been that they encourage sub-optimal economic policy-making. For example, they have been blamed for forcing countries into counterproductive austerity to not enforcing fiscal sustainability adequately.
Despite this, fiscal rules are increasingly being adopted by countries across the world, even if they are not always followed in practice. Evidence does suggest that fiscal rules are important for fiscal sustainability but that they need to be designed right and that the overall fiscal framework – the conventions and processes that govern how fiscal policy is made – needs to be supportive of their implementation.
Economic and fiscal policy has been far from perfect since fiscal rules were introduced in the UK in 1997. The main rules in place are that public sector net debt should be on course to fall as a share of GDP in five years’ time, and that public sector borrowing should not exceed 3% of GDP in five years’ time.
A group of us at the Institute for Government – a non-partisan UK-based thinktank with a mission to improve government effectiveness – recently published a report (Strengthening the UK’s fiscal framework) analysing problems with UK fiscal policy and whether changes to the rules or how they are used could help.
‘Fiscal fiction’: the inconsistency between budgeting frameworks and fiscal rules
A salient problem in the UK over recent years has been what we refer to as ‘fiscal fiction’, whereby fiscal rules are only met through implausible plans from the government. This arises principally from an inconsistency between the horizons of the fiscal rules on one hand and the medium-term expenditure framework on the other.
The UK’s current set of fiscal rules (our eighth set since 2009 that will shortly be replaced by our ninth by the recently elected new government) includes target fiscal metrics five years ahead on a rolling basis. Plans for tax and welfare policies are also always set out on a rolling five-year basis, with forecasts scrutinised and published by the Office for Budget Responsibility (OBR, the UK’s independent fiscal institution).
Detailed multi-year expenditure plans on the other hand, initiated through ‘spending reviews’,  typically have a much shorter time-frame. In the UK a spending review performs the usual function of reviewing existing expenditure, but also sets multi-year budgets for all government departments. Such budgets are, however, set for a period of anywhere between one and five years, and they are set on a fixed rather than a rolling basis. This means that, in the period immediately preceding a new spending review, detailed spending plans will not extend far into the future. Currently, for example, we only have departmental spending plans up to the end of March 2025. For the years of the fiscal forecast beyond that, the government provides a ‘pencilled in’ number for total government expenditure, which the OBR must take as given when reviewing the government’s plans.
UK governments have taken advantage of the inconsistency between these elements of the fiscal framework by pencilling in tight aggregate spending plans in the years not covered by a spending review, helping them to appear to be on course to meet fiscal rules which only apply in five years’ time. Crucially, the government has not needed to spell out how it would achieve these tight plans. In practice, at every spending review since 1997, except one, the government has revised the plans upwards.
This behaviour leads the government to systematically deliver policy giveaways in the short-term while announcing unrealistic, never-to-be-delivered spending cuts in the longer term (see chart). This is damaging for fiscal sustainability. Fiscal rules only work as a discipline if they force politicians to make the difficult trade-offs necessary to meet them.
To overcome these problems, we recommend that the government moves to a medium-term expenditure framework that sets budgets for a longer time period on a rolling basis and shortens the horizon of fiscal rules from five to three years (using escape clauses to allow an appropriate degree of flexibility during crises). This would mend the hole that currently exists in the framework and ensure that fiscal rules fulfil their function.
Chart: Effects of policy on borrowing in different years of Office for Budget Responsibility forecasts, November 2010 to November 2023

 
Changes to the framework that can encourage more strategic and long-term fiscal policy
Our report makes further recommendations on changes to the fiscal rules and wider fiscal framework in order to address other problems beyond fiscal fiction in the policy-making process. Our main recommendation is that it is essential for the chancellor to set out a comprehensive fiscal strategy, describing how government will use fiscal policy to achieve its objectives on long-run growth, net zero, demand management, intergenerational fairness and so on. Rules should follow from this. In recent times, it appears that fiscal rules have become the strategy rather than tools to implement it.
We also recommended that the remit of the OBR should be changed through updated legislation to give it greater flexibility in its assessment of the government’s rules and performance against them, moving away from a ‘pass or fail’ model of assessment of the rules and with greater license to consider fiscal sustainability more broadly. This would allow the OBR to criticise, for example, gaming of the rules (e.g. selling assets at less than fair value), which might ensure government is consistent with meeting the letter of the rules, but not their spirit.
This should be supported by greater emphasis from the OBR on the uncertainties in the fiscal forecast, and on the longer-term effects of policies, looking beyond the usual five-year period covered by its economic and fiscal forecasts where appropriate.
The report also sets out that any set of future UK fiscal rules should:

Treat investment differently to current spending. The UK has had relatively volatile and low levels of public investment, partly because ministers have found cutting capital investment to be less politically controversial than cuts to day-to-day spending.
Specify the metrics targeted by rules as ranges rather than point targets, to reduce the incentives that ministers face to constantly micromanage fiscal policy as the five-year forecast evolves, which creates damaging policy uncertainty.
Rules should include escape clauses to allow the government to deviate from them in the case of crises.

Overall, our analysis suggests that fiscal rules are an important and inevitable part of any robust fiscal framework. But they only work if they support broader, coherent fiscal objectives and are complemented by other aspects of the fiscal framework.
 
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U.S. Department of Commerce Outlines $1.6 Billion in Proposed Funding to Support Multiple Projects in Texas and Utah to Increase Production of Chips Vital for U.S. Economic and National Security
Today, the Biden-Harris Administration announced that the U.S. Department of Commerce and Texas Instruments (TI) have signed a non-binding preliminary memorandum of terms (PMT) to provide up to $1.6 billion in proposed direct funding under the CHIPS and Science Act to strengthen domestic supply chain resilience, advance our national security, and bolster U.S. competitiveness in current-generation and mature-node semiconductor production. President Biden and Vice President Harris championed the CHIPS and Science Act, a key component of the Investing in America agenda, to usher in a new era of semiconductor manufacturing in the United States, bringing with it a revitalized domestic supply chain, good-paying jobs, and investments in the industries of the future. The proposed funding would support TI’s investment of more than $18 billion through the end of decade to construct three new state-of-the-art facilities, including two in Texas and one in Utah, and is estimated to create over 2,000 manufacturing jobs and thousands of construction jobs over time.
Headquartered in Dallas, TI is a global leading manufacturer of analog and embedded processing semiconductors. The company has played an important role in the U.S. economy for almost a century, with the invention of the integrated circuit, creating the technological foundation for the modern electronics and semiconductor industries. Today, TI specializes in the production of current-generation and mature-node chips, also referred to as “foundational” chips, which are the building blocks for nearly all electronic systems, including power management integrated circuits, microcontrollers, amplifiers, sensors, and more. TI’s planned projects would meaningfully support the increasing needs for economic and national security applications – areas that TI has supported for decades.
“During the pandemic, shortages of current-generation and mature-node chips fueled inflation and made our country less safe. With this proposed investment from the Biden-Harris Administration in TI, a global leader of production for current-generation and mature-node chips, we would help secure the supply chain for these foundational semiconductors that are used in every sector of the U.S. economy, and create thousands of jobs in Texas and Utah,” said U.S. Secretary of Commerce Gina Raimondo. “The CHIPS for America program will supercharge American technology and innovation and make our country more secure – and TI is expected to be an important part of the success of the Biden-Harris Administration’s work to revitalize semiconductor manufacturing and development in the U.S.”
“Americans across the country felt the impact of semiconductor shortages during the pandemic—from car and appliance scarcities, to manufacturing lines halted and jobs lost. With the CHIPS and Science Act, President Biden and Vice President Harris took action to strengthen our supply chains, create good-paying jobs, and advance U.S. competitiveness,” said Assistant to the President for Science and Technology and Director of the White House Office of Science and Technology Policy Arati Prabhakar. “Texas Instruments is a global leader in foundational chip manufacturing, and thanks to the leadership of President Biden and Vice President Harris, TI is investing in our future here at home.”
Shortages of current-generation and mature-node chips were one of the driving factors of supply chain disruptions during the COVID-19 pandemic, causing acute impacts on the U.S. automotive, industrial, and defense industries, and on the availability of goods for Americans. TI’s more than $18 billion planned investment through the end of the decade across these three facilities would significantly increase its domestic production capacity of foundational chips, bolstering resilience against major economic disruptions. As one of the only companies building high-volume 300-mm wafer capacity for foundational technologies in the United States, this proposed CHIPS investment would help support CHIPS for America’s Vision for Success by substantially increasing domestic manufacturing capabilities for mature-node chips.
“The historic CHIPS Act is enabling more semiconductor manufacturing capacity in the U.S., making the semiconductor ecosystem stronger and more resilient,” said Haviv Ilan, president and CEO of Texas Instruments. “Our investments further strengthen our competitive advantage in manufacturing and technology as we expand our 300mm manufacturing operations in the U.S. With plans to grow our internal manufacturing to more than 95% by 2030, we’re building geopolitically dependable, 300mm capacity at scale to provide the analog and embedded processing chips our customers will need for years to come.”
The proposed CHIPS funding would be split across three projects in two locations:

Sherman, Texas: Construction of two new, large-scale 300-mm fabrication facilities that are expected to produce 65nm – 130nm essential chips, with anticipated production capacity of more than one hundred million chips every day. The Sherman site is one of the only greenfield production sites for chips on 300-mm wafers in the U.S.
 Lehi, Utah: Construction of a new, large-scale 300-mm fabrication facility to produce 28nm – 65nm analog and embedded processing chips, which is anticipated to produce tens of millions of chips every day. This project represents the largest economic investment in Utah’s history.

TI will continue to further its strategic approach of building closer direct customer relationships and maintaining inventory for high levels of customer service, both of which would help advance U.S. economic security.
“One of the four main pillars Secretary Raimondo laid out for successful implementation of the CHIPS and Science Act is the United States increasing its production capacity for current-generation and mature-node chips most vital to U.S. economic and national security,” said Under Secretary of Commerce for Standards and Technology and National Institute of Standards and Technology Director Laurie E. Locascio. “With our proposed investment in the world’s global leader of current-generation and mature-node chips, we would significantly advance our economic and national security and mitigate supply chain vulnerabilities, which were the driving factors of the CHIPS and Science Act.”
The proposed investment is estimated to create over 2,000 manufacturing jobs and thousands of construction jobs over time. Additionally, the PMT includes $10 million in proposed dedicated workforce funding to support the development of the company’s semiconductor and construction workforce. TI is committed to building a future-ready workforce, and invests in enhancing the skills of current employees, expanding internships and creating pipeline programs with a focus on building electronic and mechanical skills. TI has robust engagements with 40 community colleges, high schools, and military institutions across the U.S. to develop future semiconductor talent. TI provides their employees with a range of child care benefits that include Flexible Spending Accounts, paid parental leave, and services to match employee families with commercial child care centers according to their preferences. The company also plans to partner with additional providers to increase availability of child care services near their facilities.
The company has indicated that it plans to claim the Department of the Treasury’s Investment Tax Credit, which is expected to be up to 25% of qualified capital expenditures. In addition to the proposed direct funding of up to $1.6 billion, the CHIPS Program Office would make approximately $3 billion in proposed loans – which is part of the $75 billion in loan authority provided by the CHIPS and Science Act – available to TI under the PMT.
As explained in its first Notice of Funding Opportunity, the Department may offer applicants a PMT on a non-binding basis after satisfactory completion of the merit review of a full application. The PMT outlines key terms for a potential CHIPS incentives award, including the amount and form of the award. The award amounts are subject to due diligence and negotiation of award documents and are conditional on the achievement of certain milestones. After the PMT is signed, the Department begins a comprehensive due diligence process on the proposed projects and continues negotiating or refining certain terms with the applicant. The terms contained in any final award documents may differ from the terms of the PMT being announced today.
About CHIPS for America
Over two years after the passage of CHIPS and Science Act, the Biden-Harris Administration is moving full speed ahead in order to help protect our economic and national security and restore American leadership in an industry that we started decades ago. Since the beginning of the Administration, semiconductor and electronics companies have announced nearly $400 billion in private investments, catalyzed in large part by public investment. By allocating over $31 billion in proposed funding across 15 states to build factories domestically and proposing to invest billions more in research and innovation, CHIPS for America is creating an estimated 100,000+ jobs, including tens of thousands of good-paying jobs that don’t require a college degree. Our efforts are a meaningful step towards ensuring that the United States produces more of the world’s most advanced technologies – from AI to defense systems and everyday items like cars and medical devices. With a focus on expanding capacity, enhancing capabilities, maintaining competitiveness, and driving commercialization, CHIPS for America is working towards driving our future, securing our supply chains, and cementing America’s place at the forefront of technology.
CHIPS for America is part of President Biden’s economic plan to invest in America, stimulate private sector investment, create good-paying jobs, make more in the United States, and revitalize communities left behind. CHIPS for America includes the CHIPS Program Office, responsible for manufacturing incentives, and the CHIPS Research and Development Office, responsible for R&D programs, that both sit within the National Institute of Standards and Technology (NIST) at the Department of Commerce. Visit https://www.chips.gov to learn more.
 
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By Shafik Hebous, Nate Vernon-Lin | Crypto mining and data centers now account for 2 percent of global electricity use and nearly 1 percent of global emissions, and their footprint is growing.
What do crypto assets and artificial intelligence have in common? Both are power hungry.
Because of the electricity used by high-powered equipment to “mine” crypto assets, one Bitcoin transaction requires roughly the same amount of electricity as the average person in Ghana or Pakistan consumes in three years. ChatGPT queries require 10 times more electricity than a Google search, due to the electricity consumed by AI data centers.
As the Chart of the Week shows, crypto mining and data centers together accounted for 2 percent of world electricity demand in 2022. And that share is likely to climb to 3.5 percent in three years, according to our estimates based on projections from the International Energy Agency. That would be equivalent to current consumption of Japan, the world’s fifth largest electricity user.

The climate impact of these activities—irrespective of their social and economic benefits—is cause for concern. A recent IMF working paper found that crypto mining could generate 0.7 percent of global carbon dioxide emissions by 2027. Extending the analysis to data centers (based on IEA estimates), means their carbon emissions could reach 450 million tons by 2027, or 1.2 percent of the world total.
The tax system is one way to steer companies toward curbing emissions. According to IMF estimates, a direct tax of $0.047 per kilowatt hour would drive the crypto mining industry to curb its emissions in line with global goals. If considering air pollution’s impact on local health as well, that tax rate would rise to $0.089, translating into an 85 percent increase in average electricity price for miners. Such a levy would raise annual government revenue of $5.2 billion globally and reduce annual emissions by 100 million tons (around Belgium’s current emissions).
For data centers, a targeted tax on their electricity use would need to be set at $0.032 per kilowatt hour, or $0.052 including air pollution costs. It is slightly lower than for crypto because data centers tend to be in locations with greener electricity. This could raise as much as $18 billion annually.
The situation today is the opposite: many data centers and crypto miners enjoy generous tax exemptions and incentives on income, consumption, and property. Considering the environmental damage, the lack of significant employment, and pressures on the electrical grid (possibly raising prices for households and reducing demand for the use of other low emissions goods, such as electric vehicles), the net benefits of these special tax regimes are unclear at best.
Policy incentives
On the flip side, AI applications could lead to smarter and more efficient power use, which some have posited could help ease electricity demand. The right policies can still incentivize developing AI applications with positive societal spillovers while addressing the environmental damage.
For policymakers, a broad carbon price coordinated across countries would be the best way to curb emissions, because it would encourage reduced fossil-fuel consumption, cleaner power sources, and improved energy efficiency. To limit global warming to 2 degrees, countries would need to introduce additional measures equivalent to a carbon price rising to $85 per ton by 2030.
In the absence of a global carbon price, targeted measures could encourage crypto miners and data centers to use more energy-efficient equipment and may even motivate the adoption of less energy intensive crypto mining. Complementing electricity taxes with credits for zero-emission, bilateral power purchase agreements, and potentially renewable energy certificates would also help.
Cross-border coordination also remains important, as stricter measures in one location could encourage relocation to jurisdictions with lower standards.
As the window of opportunity for containing rising temperatures rapidly closes, expanding renewable energy sources and adopting an appropriate carbon price are urgently needed. In the interim, targeted measures, including taxation, can help mitigate increasing emissions from crypto mining and data centers.
 
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Blog post by Evangelos Charalambakis, Omiros Kouvavas and Pedro Neves | How quickly do consumers react to rate hikes? The answer depends in part on how much they know about financial matters. This ECB Blog post shows that the better informed they are, the quicker their reaction.

When central banks raise interest rates they aim to dampen demand in the economy, which ultimately helps keep inflation at bay. Consumers are key for that. They make decisions every day: how much to spend on groceries, where to go on vacation, or whether to buy the latest trends in fashion. In this post we focus on another aspect of how people manage their money. When do they think it’s a good time to put money into their savings account – delaying consumption – and when is it a good time to take out a loan – bringing consumption forward in time?
To investigate this question we used the Consumer Expectation Survey (CES), which has approximately 20,000 participants each month. Every month the ECB asks consumers in eleven euro area countries, including Germany, France, Spain and Italy, about their experiences and expectations regarding the economy, inflation, income and labour markets. The CES collects information on perceptions about the optimal timing of financial decisions (such as saving and borrowing) and expectations about interest rates. We distinguished between two separate groups of participants according to their financial literacy. Financial literacy is measured in the CES according to a standardised set of questions developed by Lusardi and Mitchell (2011). The CES asks three multiple-choice questions to help us assess consumers’ understanding of a) interest rate compounding, b) nominal vs. real values and c) portfolio risk diversification. We categorised those respondents with higher scores as “highly financially literate” and the other participants as having “low financial literacy”. We also asked all participants where they expected mortgage and savings rates would be in twelve months. Our last two questions were: “Do you consider now a good time to borrow?” and “Do you consider now a good time to put money into a savings account?”.
A significant change in monetary policy happened during the last two years in which the participants received these questions: The ECB raised its key policy interest rate from -0.5% in July 2022 to 4.0% in September 2023 to fight high inflation. Our survey results show consumers have adjusted their interest rate expectations for mortgages and savings in accordance with this monetary policy tightening. We also found that financial literacy levels have a substantial effect on how quickly consumers adjust and how they think about good timing for borrowing or saving. Households that are more financially literate adjust their savings and borrowing decisions much more quickly and extensively than those that are less financially literate, even though interest rate expectation dynamics are similar across both groups.
 
How did people respond to the increase in interest rates?
Starting in early 2022, expected interest rates for mortgages and deposits increased substantially in anticipation of, and then alongside, the ECB’s rate policy tightening. Chart 1 shows that consumers adjusted their interest rate expectations for mortgages and savings upwards starting in late 2021, when the ECB announced the end to net asset purchases under its pandemic emergency purchase programme (PEPP). Their expectations about interest rates for mortgages increased from 3.3% in October 2021 to 5.5% in October 2023. Likewise, interest rate expectations for savings increased from 1.6% to 3.1% over the same period. From July 2022 to September 2023 the ECB raised its key interest rates ten times in a row to combat high inflation (grey shaded area). Between October 2023 and June 2024, interest rate expectations for mortgages and savings declined to 4.9% and 2.8%, respectively, in anticipation of monetary policy easing (the ECB cut its key policy rates by 25 basis points in June 2024).

 
Chart 1
Interest rate expectations over time

Percent

Source: ECB Consumer Expectations Survey (CES).
Notes: Mean interest rate expectations on mortgages and savings. Weighted estimates. Each month the CES asks respondents the following two questions to collect information on their expectations about interest rate for mortgages and savings: a) In 12 months from now, what do you think will be the interest rate on mortgages in the country you are currently living in? b) ) In 12 months from now, what do you think will be the interest rate on savings accounts in the country you are currently living in? The grey shaded area depicts the successive interest rate hiking period, i.e., July 2022- September 2023. Latest observation: May 2024.

Adjusted interest rate expectations also affected overall perceptions of the optimal timing for saving and borrowing. The percentage of all respondents saying that it was a good time to borrow fell from 24% at the beginning of the tightening cycle to 12.7% in October 2023. Over the same period, the percentage saying that it was a good time to put money into a savings account increased from 26.9% to 40.9%. Consumers’ perceptions of good timing therefore partially adjusted following the path of monetary policy.
 
The importance of financial literacy
There is, however, heterogeneity among consumers depending on their level of financial knowledge. Those with high levels of financial literacy increased their expectations about mortgage and savings rates by 1.2 and 0.8 percentage points, respectively, from July 2022 to September 2023. For the same period, consumers with low levels of financial literacy increased their expectations about mortgage and savings rates by 0.6 and 1.2 percentage points, respectively. So both groups increase their interest rate expectations quite substantially. But when it comes to the perception of what to do and when to do it, we see a larger difference.

Chart 2
Good time to borrow – by financial literacy

Percentage of consumers

Source: ECB Consumer Expectations Survey (CES).
Notes: Weighted estimates. Each month the CES asks respondents if they think now if it is a good time or a bad time to borrow money from a bank on a 5-point scale, i.e., “very bad”, “bad”, “neither good nor bad”, “good” and “very good”. The chart depicts the percentage of consumers answering it is “good” or “very good” to borrow by high and low level of financial literacy. Latest observation: January 2024

 
Chart 3
Good time to save – by financial literacy

Percentage of consumers

Source: ECB Consumer Expectations Survey (CES).
Notes: Weighted estimates. Each month the CES asks respondents if they think now if it is a good time or a bad time to save money in savings accounts on a 5-point scale, i.e., “very bad”, “bad”, “neither good nor bad”, “good” and “very good”. The chart depicts the percentage of consumers answering it is “good” or “very good” to save by high and low level of financial literacy. Latest observation: January 2024

Charts 2 and 3 show the percentages of respondents with high and low financial literacy that consider it a good time to borrow or to save. Consumers with high levels of financial literacy adjust their perceptions of when to borrow or save more than consumers with low levels of financial literacy, despite the fact that both groups exhibit similar dynamics in terms of interest rate expectations.
Chart 4 shows that expectations relating to mortgages and savings are by far the highest contributing factor to whether a respondent thinks it is a good time to borrow or save. However, the effect on the total adjustment is mainly driven by the strong response of consumers with a high level of financial literacy, for which the link between their adjusted interest rate expectations (after the tightening) and their responses about whether it is a good time to borrow and save is much stronger. Other expectations have much less of an effect.

 
Chart 4
Estimated coefficients from a linear probability model

Percentage pointsGood time to borrow

Good time to save

Source: ECB Consumer Expectations Survey (CES).
Notes: Weighted estimates. Panel A shows the estimated coefficients derived from a linear probability regression model in which a household’s individual perception of being a good time to borrow is regressed on its expectations about income growth, inflation, economic growth and interest rates on mortgages over the next 12 months. Panel B shows the estimated coefficients derived from a linear probability regression model in which a household’s individual perception of being a good time to save is regressed on its expectations about income growth, inflation, economic growth and interest rates on savings over the next 12 months. Both models control for individual, wave and country-fixed effects, as well as household income, liquidity, access to credit and financial situation. The reported bands correspond to 95% confidence intervals. Latest observation: January 2024

 
Conclusion
We find that consumers adjust their interest rate expectations following the path of monetary policy. However, CES data reveal that consumers with a high level of financial literacy adjust their perceptions of whether it is a good borrowing or saving environment more quickly than those with a low level of financial literacy. This is in line with other economic literature which points to the importance of financial literacy in terms of economic outcomes and expectations.[1]
Therefore, the way monetary tightening affects consumers’ actions is not only dependent on information reaching consumers but also on their level of financial literacy. This in turn implies that improving financial literacy could have the potential to support the translation of central bank policies into actions by consumers.
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.
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Low financial literacy affects the ability to save; see Lusardi (2008). Lusardi (2013) finds that more financially literate individuals are much less likely to have engaged in high-cost borrowing. Finally, financial literacy has a positive and significant impact on households’ individual returns on savings accounts, see Deuflhard, Georgarakos and Inderst (2014)

 
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Majority Leader Charles Schumer and Empire State Development President, CEO & Commissioner Hope Knight Joined Edwards Vacuum Officials on Tour of Construction Site of Major Semiconductor Supplier at the Western New York Science & Technology Advanced Manufacturing Park, Global Manufacturer of Dry Pumps Will Strengthen New York’s Semiconductor Supply Chain, Create up to 600 Jobs in the Finger Lakes Region, Project Complements “Finger Lakes Forward” – The Region’s Comprehensive Strategy To Revitalize Communities and Grow the Economy.
Construction Site Photos Here

Governor Kathy Hochul and U.S. Senate Majority Leader Charles Schumer today announced significant progress towards the construction of the first phase of the $319 million Edwards Vacuum dry pump manufacturing facility, located in the Genesee County town of Alabama. Edwards Vacuum, part of the Atlas Copco Group, is a global leader in vacuum and abatement equipment for the semiconductor industry, and a major supplier to semiconductor manufacturers. Today, Majority Leader Schumer and Empire State Development President, CEO and Commissioner Hope Knight toured the site, located at the Western New York Science & Technology Advanced Manufacturing Park accompanied by Edwards Vacuum executives. Edwards Vacuum’s decision to invest in New York State followed passage of New York’s Green CHIPS legislation and the federal CHIPS and Science Act, which together spurred Micron’s unprecedented $100 billion commitment to Central New York which is expected to create nearly 50,000 jobs as well as GlobalFoundries $11.6 billion expansion in the Capital Region which will create more than 1,500 direct jobs and thousands of indirect jobs.
“Edwards Vacuum’s commitment to Upstate New York will create 600 good-paying jobs and attract additional investment in both Western New York and the Finger Lakes regions,” Governor Hochul said. “Between New York’s Green CHIPS Program and the federal CHIPS and Science Act, we’re empowering a manufacturing resurgence in our state, ensuring we’re positioned as a global hub for innovation and the epicenter of semiconductor manufacturing nationwide.”
Senate Majority Leader Charles Schumer said, “This milestone marks major progress toward the opening of Edwards Vacuum’s new dry pump manufacturing facility in Genesee County as a key addition to making Upstate NY a global center for the semiconductor industry. A vast amount of the world’s computer chips are made using Edwards Vacuum equipment, and today Genesee County becomes the beating heart of those efforts for America. From Micron to GlobalFoundries, all the major semiconductor companies in New York and across America need the vacuum technology like Edwards makes for their chip fabs. I urged Edwards Vacuum to expand in Western NY because I knew that it would be a win for Edwards Vacuum, a win for Western NY’s economy, and a win for America’s semiconductor supply chain, and today that is becoming a reality. Thanks to my CHIPS & Science Law, which continues to deliver investment after investment for Upstate NY, we are adding another stop to our semiconductor superhighway along the booming I-90 corridor Tech Hub with Edwards Vacuum’s groundbreaking milestone celebration today. Edwards Vacuum is a major player in the semiconductor supply chain, and it’s about to power Genesee County with a $319 million facility and 600 new good paying jobs. I am continuing to push for landing the federal incentives from my CHIPS & Science Law to make this project a reality, boosting Genesee County’s economy and positioning Western NY as a hub for Upstate NY and the nation’s semiconductor industry.”
Empire State Development President, CEO and Commissioner Hope Knight said, “Edwards Vacuum continues to make tremendous progress on its new state-of-the-art facility that will create hundreds of good-paying jobs and generate millions of dollars in investments. The future of domestic semiconductor manufacturing runs through New York State, which continues to grow as a global hub for advanced manufacturing, research and development.”
The technology produced at Edwards Vacuum’s newest facility is a vital component to controlling the highly sensitive environment of semiconductor manufacturing processes. Construction on the $127 million first phase of Edwards 240,000 square-foot campus will include manufacturing, warehouse, and administration facilities, with a capacity to produce 10,000 dry pumps per year. The all-electric facility will strive for LEED certification, with a majority of the power generated via hydroelectricity.
Edwards’ commitment to build in the U.S. comes after significant investments by the Biden-Harris Administration to increase domestic chip manufacturing, and the passage of the federal CHIPS and Science Act and New York’s Green CHIPS legislation, as well as a growing need to support its customers in North America. Edwards dry pumps are currently manufactured in Asia. By bringing manufacturing to New York, Edwards customers will experience shorter wait times, improved responsiveness and reduced CO2 emissions from an American-made product. Edwards estimates that when phase one is operational, it will reduce CO2 emissions by 13,000 tons per year.
Empire State Development has awarded Edwards Vacuum up to $21 million through a combination of performance-based Excelsior Jobs Tax Credits and Investment Tax Credits in exchange for creating 600 jobs, and an additional $1 million to support workforce development efforts and the training of a diverse and inclusive workforce. Additionally, the New York Power Authority is supporting the project through a 4.9-megawatt (MW) low-cost Niagara hydropower allocation and a 2.1 MW of High Load Factor power allocation that NYPA will procure for Edwards on the energy market. Low-cost Niagara hydropower is available for companies within a 30-mile radius of the Power Authority’s Niagara Power Project or businesses in Chautauqua County.
New York Power Authority President and CEO Justin E. Driscoll said, “As New York’s status as a global leader in semiconductor manufacturing continues to grow, so too does the need for reliable supply chain partners. NYPA is leveraging its low-cost Niagara hydropower to attract manufacturers of cutting-edge technologies to Western New York, stimulating private investment and strengthening the local economy. Edwards Vacuum’s project at STAMP is moving forward to the great benefit of the Western New York economy and NYPA is proud to support the project.”
Governor Hochul’s Commitment to Growing New York’s Semiconductor Industry
Governor Hochul has maintained a strong commitment to building a modern economy in New York State through growing a dynamic and innovative semiconductor industry. In 2022, the Governor signed New York’s historic Green CHIPS legislation to make New York a hub for semiconductor manufacturing, creating 21st century jobs and kick-starting economic growth while maintaining important environmental protections. As part of the FY 2024 Budget, Governor Hochul secured a $45 million investment to create the Governor’s Office of Semiconductor Expansion, Management, and Integration (GO-SEMI), which leads statewide efforts to develop the chipmaking sector. In December 2023, Governor Hochul announced a $10 billion public-private partnership – including $9 billion in private investment from IBM, Micron, Applied Materials, Tokyo Electron and other semiconductor leaders – to bring the future of advanced semiconductor research to New York’s Capital region by creating the nation’s first and only publicly owned High NA EUV Lithography Center at the Albany Nanotech Complex.
New York is home to a robust semiconductor industry which is currently home to more than 150 semiconductor and supply chain companies that employ over 34,000 New Yorkers. Thanks to Governor Hochul’s efforts, the industry is continuing to expand with major investments from semiconductor businesses and supply chain companies like Micron, GlobalFoundries, AMD, Edwards Vacuum, MenloMicro and TTM Technologies to expand their presence in New York. In fact, in the last two years chip companies have announced over $112 billion in planned capital investments in New York – more than any other state – and one in four U.S. made chips will be produced within 350 miles of upstate New York – no other region in the country will account for a greater share of domestic production.
Semiconductors are vital to the nation’s economic strength, serving as the brains of modern electronics, and enabling technologies critical to U.S. economic growth, national security, and global competitiveness. The industry directly employs over 300,000 people in the U.S. and supports more than 1.8 million additional domestic jobs. Semiconductors are a top five U.S. export, and the industry is the number one contributor to labor productivity, supporting improvements to the effectiveness and efficiency of virtually every economic sector — from farming to manufacturing.
Senator Kirsten Gillibrand said, “I am thrilled to see progress toward construction of the Edwards Vacuum facility in Genesee County, which will create hundreds of good jobs and grow the economies of both Western New York and the Finger Lakes. The Edwards Vacuum facility will produce technology that is vital to ensure that New York continues to grow as a global leader in semiconductor manufacturing. I’m proud to have fought to pass the CHIPS and Science Act that helped encourage companies like Edwards Vacuum to expand manufacturing in New York, and I look forward to seeing the growth this facility brings to the region for generations to come.”
Representative Joe Morelle said, “Investing in regional advanced manufacturing and innovation is absolutely critical to unlocking the full potential of our region and ensuring our leadership on the national and global stages. Building on the Regional Technology Hub designation I helped secure in Washington, the continued success of Edwards Vacuum and the entire Western New York Science & Technology Advanced Manufacturing Park (STAMP) facility will help propel our region’s semiconductor leadership to new heights. I’m grateful to Governor Hochul, Senator Schumer, and all my colleagues on both sides of the aisle for their support of these important projects, and I look forward to our continued work together.”
State Senator George M. Borrello said, “Edwards Vacuum’s major investment in Genesee County will be a game changer for the area and a new chapter in the proud manufacturing legacy of Western New York and the Finger Lakes Region. We have the skilled workforce, infrastructure and public-private partnerships that will drive the success of the company’s new STAMP site facility, allowing it to thrive and positively impact the local economy. My thanks go out to Senator Schumer, Governor Hochul, the Genesee County Legislature and IDA who all played a role in bringing this transformative project to the community. Great things are on the horizon.”
Assemblymember Steven Hawley said, “New York is at the center of the growing semiconductor industry and Edwards Vacuum’s Choice is leading the charge. The company’s progress made through STAMP has bolstered the GLOW region’s economy and made them a vital part of the community as they continue creating jobs and supporting other businesses across the state. I look forward to seeing the impact these investments have on our state as we increase our global standing as a leader in the semiconductor industry.”
Genesee County Legislature Chair Rochelle Stein said, “Genesee County commends Edwards Vacuum for the progress they have made at STAMP to realize the growth of critical supply chain manufacturing for our growing semiconductor industry. So many people are working so hard to realize the vision we all have for STAMP, and today’s event is proof that staying the course and being steadfast brings us another step closer to that vision.”
Town of Alabama Supervisor Rob Crossen said, “On behalf of the town of Alabama and my fellow board members, congratulations to Edwards Vacuum on the progress of their construction at the STAMP mega-site. This is the latest milestone to occur at STAMP and it continues the realization of our shared vision for investments that improve the economy, attract good paying jobs, and make our community a better place to work and live.”
Mark Masse, President & CEO of the Genesee County Economic Development Center said, “We congratulate Edwards Vacuum for today’s milestone and celebrate the investment they are making at STAMP to grow Genesee County’s economy and strengthens New York’s position as an emerging leader in the semiconductor and semiconductor supply chain industries. We look forward to continuing to work with Edwards Vacuum as the company builds here and just as important recruit the talent they are seeking to make this facility a leader in the semiconductor supply chain industry.”
Greater Rochester Enterprise President & CEO Matt Hurlbutt said, “Edwards Vacuum has made significant progress toward the construction of its dry pump manufacturing facility at the STAMP mega site in Genesee County. This progress marks an important milestone in solidifying Edwards’ ties to the Greater Rochester, NY region’s robust advanced manufacturing and semiconductor sectors. Greater Rochester Enterprise remains committed to supporting Edwards’ success by fostering strong relationships between the company’s leadership and key stakeholders in business, academia, and the community. Combine this exceptional connectivity with top-tier talent, access to low-cost hydropower, and world-class R&D resources, and it’s no wonder Edwards chose to expand in the Greater Rochester, NY, region.”
Accelerating Finger Lakes Forward
Today’s announcement complements “Finger Lakes Forward,” the region’s comprehensive strategy to generate robust economic growth and community development. The regionally designed plan focuses on investing in key industries including photonics, agriculture‎ and food production, and advanced manufacturing. More information is available here.
About Empire State Development
Empire State Development is New York’s chief economic development agency, and promotes business growth, job creation, and greater economic opportunity throughout the state. With offices in each of the state’s 10 regions, ESD oversees the Regional Economic Development Councils, supports broadband equity through the ConnectALL office, and is growing the workforce of tomorrow through the Office of Strategic Workforce Development. The agency engages with emerging and next generation industries like clean energy and semiconductor manufacturing looking to grow in New York State, operates a network of assistance centers to help small businesses grow and succeed, and promotes the state’s world class tourism destinations through I LOVE NY. For more information, please visit esd.ny.gov, and connect with ESD on LinkedIn, Facebook and X.

 
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The post New York State Governor | Governor Hochul and Majority Leader Schumer Announce Significant Progress Towards Edwards Vacuum’s $319 Million Semiconductor Supply Chain Facility in Genesee County first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.