Economica, 85: 735-770; B. Richter, M. Schularick and I. Shim (2019), The costs of macroprudential policy, Journal of International Economics, 118: 263282; Ampudia, M., M. Lo Duca, M. Farkas, G. Perez Quiros, M. Pirovano, G Rünstler, and E. Tereanu (2021), On the Effectiveness of Macroprudential Policy, ECB Working Paper Series 2559. Behncke, S. (2022), Effects of macroprudential policies on bank lending and credit risk, Journal of Financial Services Research. Ibidem. banks (cf. slide 2). As a consequence, banking sector resilience to shocks is now much larger than before the GFC. Stress tests conducted by many central banks indicate in fact that bank capital is likely to be sufficient to cover potential losses under severe stress scenarios. 9 At the SNB, we also regularly conduct stress tests for the Swiss banking sector. Results, reported in our annual Financial Stability Report, suggest that most banks have adequate capital buffers to absorb losses under adverse scenarios, in particular also in the event of an abrupt and steep interest rate rise combined with declining real estate prices. This implies that banks could withstand the shock, and still fulfil their key role as credit providers to the real economy. The coronavirus pandemic has highlighted the importance of banking sector resilience. Despite the elevated uncertainty prevailing at the onset of the pandemic, market participants remained confident in the banks’ ability to absorb potential losses resulting from the pandemic and to continue at the same time to fulfil their role as credit providers.

Unless there is a substantial nominal depreciation, the current high value of the Swiss franc will therefore continue. Growth in the M1, M2 and M3 monetary aggregates has been perceptibly weaker since summer; this is primarily attributable to the rise in long-term interest rates. Liquidity held by households and companies has nevertheless remained high. In the past, a sustained high level of liquidity generally pointed to inflation risks. As a result of the financial crisis, however, this correlation cannot currently be made. Thus, in recent years, the inflation rate has remained exceptionally low despite a high level of liquidity. At present, there are no signs of a rise in inflation in Switzerland. Our inflation forecast shows no risk of inflation whatsoever. In addition, surveys on inflation expectations reveal values that are consistent with our definition of price stability. This applies not only to short-term inflation expectations, but also to long-term horizons of up to ten years. Furthermore, production capacity in Switzerland is still underutilised, which also makes a rapid rise in inflation unlikely. SNB monetary policy In conclusion, I would like to look at the SNB’s monetary policy. Overall economic conditions have hardly changed since summer. Consequently, monetary policy remains a challenge for the SNB. Up to now, our economy has performed relatively well, considering the difficult international environment. And we have not had to enforce the minimum exchange rate with foreign currency purchases since September 2012. Financial markets expect short-term interest rates to stay very low worldwide for some time to come.