Philipp M Hildebrand: Economic outlook and monetary policy
Speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank,
Apéritif Marché monétaire, Geneva, 17 November 2005.
The complete speech can be found in French on the Swiss National Bank's website (www.snb.ch).
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The Swiss economy has benefited from a favourable international environment. Activity has remained
strong in the US, whereas it has improved in Japan and, more recently, in Europe. In Switzerland also,
the latest indicators point towards stronger growth. Exports remain the engine of the recovery but
private consumption has also picked up. However, consumer confidence remains fragile in the context
of only modestly improving labour market conditions. The SNB expects the economic recovery to
continue. A sudden adjustment of the US current account imbalance or a further increase of energy
prices are predominant risks.
From a monetary point of view, the current situation is characterised by different counteracting forces.
On the one hand, the economic outlook is positive. On the other hand, some risks put this favourable
picture into perspective. Furthermore, the increase of energy prices might endanger medium term
price stability at a time when monetary conditions remain expansive. Last but not least, globalisation
continues to hold down the prices of many goods. In this complex environment, it is important that
central banks succeed in preserving their most important monetary asset, namely well anchored
inflation expectations. In Switzerland, this means that as long as the economic recovery remains on
track, we should not postpone for too long the process of normalising monetary conditions. Otherwise,
we would put medium term price stability at risk.