The companies apparently trusted that the SNB would be able to prevent a sustained decline in the level of prices through its decisive use of unconventional measures. The SNB was able to preserve its monetary policy credibility, even in this difficult environment. The second point relates to the adjustment processes following the sudden upward surges in the value of the Swiss franc. The negative or very low inflation in Switzerland was in fact part of these adjustment processes, since it contributed to reducing the overvaluation of the Swiss franc over time. Thus, the real exchange rate appreciated considerably less than the nominal exchange rate (cf. Chart 3). This helped to cushion the impact of the nominal appreciation on  Page 3/16  the real economy. The economy’s ability to adapt to an environment with low – and in some instances negative – inflation has been better than many expected. The Swiss economy has fared relatively well over the past 15 years. The labour market has remained robust overall, and GDP growth has been good by international comparison (cf. Chart 4). Like most other countries, Switzerland was unable to avoid significant declines in GDP amid the global financial crisis and during the pandemic, but each time our economy quickly returned to a growth trajectory. The SNB was able to ensure price stability in the phase marked by deflationary risks, and thus contributed to a comparatively robust development of the economy.

Central bank liquidity provision This brings me to the second factor, namely central bank liquidity provision, which influences the effective pass-through of monetary policy decisions to money market rates and financing conditions more broadly. The relation between excess liquidity and overnight money market rate dispersion has also changed since the global financial crisis. Prior to 2015, higher levels of excess liquidity tended to lower the dispersion of money market rates (Slide 6). After 2015, increases in dispersion also occurred in periods of ample and rising excess liquidity. https://www.ecb.europa.eu/press/key/date/2020/html/ecb.sp201123~8d9573b1b1.en.html  3/7  24/11/2020  Shifting tides in euro area money markets: from the global financial crisis to the COVID-19 pandemic  There are several reasons for this changing relationship. Prior to 2015, central bank liquidity provision and the associated Eurosystem balance sheet expansion were driven by the need to restore an impaired monetary policy transmission mechanism, caused by heightened market stress during the financial and sovereign debt crises. During the global financial crisis, when the unsecured interbank market came under stress, banks turned to the central bank to obtain liquidity. The Eurosystem essentially assumed the liquidity-providing role of the private market. During the sovereign debt crisis in the euro area, banks once again increased their demand for central bank liquidity. The provision of central bank liquidity also stimulated the supply of liquidity in the private market, especially to banks located in the periphery. [16] The optimal design of central bank liquidity policies is an important research question, which is examined in the conference paper by Robatto (2020).