Different economic policies, such as fiscal policy, monetary policy, and labour market policy, can be distinguished according to their objectives, the policy instruments that are suitable for achieving the objectives and the authority or authorities that control the instruments and are responsible for achieving the objectives. From this point of view, it is clear that monetary policy and financial-stability policy are distinct and different, and understanding this is important. Monetary policy, in the form of flexible inflation targeting, has the objective of stabilising both inflation around the inflation target and resource utilisation around a sustainable level. Under normal circumstances, the suitable instruments are the policy rate and communication, including the publication of forecasts of inflation, the real economy and (by some central banks) the policy rate. In times of crisis, as we have seen during the financial crisis, in particular when the policy rate is at or close to the zero lower bound, other more unconventional instruments can be used. These instruments include fixed-rate lending at longer maturities, asset purchases (quantitative easing) to affect longer interest rates and expectations of future short rates and foreign-exchange intervention to prevent currency appreciation or even to induce currency depreciation. The authority responsible for monetary policy is typically the central bank. In many countries, including all the member states of the EU, the central bank is given exclusive authority over monetary policy by statute and various measures to protect this policy independence are put in place. Financial-stability policy has the objective of maintaining and promoting financial stability.

Thomas Jordan: Prospects for the Swiss economy in 2009 Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the erfa-Gruppe, Weinfelden, 15 January 2009. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Following a long, strong and broad-based growth phase, the world economy moved into a major recession in mid-2008. About a year after the beginning of the unprecedented financial market crisis, there was a radical turnaround in the global economic outlook. The European and Asian economies were not disconnected from the US, as had been hoped. The Swiss economy leans heavily on its export and financial sectors and faces a difficult year. A recession appears unavoidable in 2009. Consequently, the skilful deployment of monetary and fiscal policies as well as optimal conduct on the part of business practitioners in Switzerland are particularly important. Monetary policy can be changed quickly and its impact is relatively rapid through its influence on interest rates and the exchange rate. The SNB has reacted resolutely to the deterioration in the economic situation and has reduced interest rates to almost zero. If necessary, monetary policy can be rendered even more expansionary through a series of alternative instruments. In the case of fiscal policy, the focus is on effective automatic stabilisers – first and foremost, allowing the occurrence of temporary budget deficits, together with unemployment benefits and compensation for short-time working.