Thomas Jordan: Financial crisis dispersing? Economy changing
direction?
Speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank,
at the general assembly of the Handels- und Industrieverein des Kantons Schwyz, Schwyz,
25 August 2009.
The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch).
* * *
The situation on the international financial markets has recently brightened again. This is
mainly due to the positive keynote in company earnings reports and a series of unexpectedly
favourable economic data. The relaxation of monetary policy was pursued further through the
implementation of unconventional measures in March 2009, and this is also likely to have
had a calming effect. Price advances since March should, however, be partly seen as
corrections to excessive downward movements in the previous period. Considerable
uncertainties still prevail and the danger of setbacks should not be carelessly
underestimated.
The recessionary developments in the world economy weakened significantly in the second
quarter of 2009. Expansionary monetary policy around the world, together with fiscal support
programmes, have probably played an important role in this respect. Economic indicators are
also showing a turn for the better in the Swiss economy. Nevertheless, in view of the
exceedingly low level of utilisation of production capacity, industrial investment will probably
continue falling. Given the increasingly gloomy outlook for employment, private consumption
is also likely to put a damper on the resumption of cyclical activity. Consequently, the current
overall situation of the Swiss economy remains difficult despite the many rays of hope with
regard to the economic cycle. Also, the danger of deflation does not yet seem to have been
entirely averted.
We have not yet reached the moment for a change of direction in monetary policy in
Switzerland. After analysing the available economic data and forecasts and taking various
risk considerations into account, there is no need for the SNB to take monetary policy action
at present. The SNB can afford to adopt a holding stance. However, this holding stance
should not be mistaken for inactivity. The SNB continues its firm implementation of an
extremely expansionary monetary policy and the unconventional measures launched on 12
March 2009. The Swiss franc money market is still being provided with a generous and
flexible supply of liquidity, interest rates remain low, Swiss franc bonds are still being
purchased to dampen the level of risk premiums on the Swiss franc bond market as and
when needed and the appreciation of the Swiss franc will continue to be prevented.