Philipp Hildebrand: Global economic prospects and key challenges for
monetary policy
Summary of a speech by Mr Philipp Hildebrand, Member of the Governing Board of the Swiss National
Bank, at the Money Market Event, Zurich, 23 March 2006.
The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch)
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Summary
Current economic developments are basically in line with the SNB's expectations. Global economic
activity is robust and the outlook is bright. The SNB expects broad-based growth of over 2% for 2006
and a moderate rate of inflation of approximately 1%.
In addition to the usual economic risks, monetary policy today is faced with three key challenges. First,
the effects of globalisation on inflation must be anticipated. Second, the way in which the interaction
between globalisation and an ample supply of liquidity affects the price development of several assets
needs to be analysed. The SNB's monetary policy concept enables it to take a long-term view and to
recognise possible distortions early on. Third, identifying the neutral interest rate has become more
difficult in today's environment. Many factors tend to support a lower neutral interest rate, while others
would support a higher neutral rate.
Against this background, the SNB will continue the gradual normalisation of its monetary policy. The
scale and timing of this normalisation process will depend on further economic developments. Owing
to a favourable inflation trend and well-anchored inflation expectations, we are in a position to
cautiously approach a neutral interest rate level.