The ongoing recovery of the real economy, however, is likely to produce higher core inflation in these economies, too, in the near future. Against the backdrop of an expanding economy and higher inflation, the US Federal Reserve raised its key interest rate in March – the third interest rate hike since the end of 2015. The  Page 2/10  normalisation of US monetary policy is therefore continuing. By contrast, the European Central Bank and the Bank of Japan are maintaining their expansionary monetary policy. Does this mean there is cause for optimism for the period ahead? Global economic sentiment is really quite positive. Nonetheless, significant political uncertainties remain. Within the euro area, the French elections are currently dominating the headlines. Uncertainty persists about how Brexit will unfold. Looking across the Atlantic, there are still a number of questions concerning the new US administration’s future economic and trading policy. New political directions which influence the growth of our trading partners are of course highly relevant for a small open economy like Switzerland. And what about the economic situation here at home? The Swiss economy is still recording moderate growth (cf. chart 3). Following the discontinuation of the minimum exchange rate, GDP contracted as a result of Swiss franc appreciation in the first quarter of 2015. However, since then, the economy has grown, and current economic data indicate that this growth will sustain. For 2017, we are forecasting an increase in GDP of some 1.5%. Nevertheless, production capacity is still not fully utilised.

To avoid potential conflicts of interest, we do not invest in equities of international mid-cap and large-cap banks or bank-like institutions. The SNB also does not buy any shares of companies that produce internationally condemned weapons. Furthermore, we exclude companies which seriously violate fundamental human rights or systematically cause severe environmental damage. Our exclusion policy is based on clearly defined principles and is applied unequivocally. To identify the relevant companies, we rely on the recommendations of recognised external experts. As you can see, the SNB pursues a clear policy in its investment activity and takes into account a long list of criteria and requirements. These are geared towards helping us to fulfil our monetary policy mandate. They are intended to ensure that our balance sheet can be used at any time for monetary policy reasons, and that our currency reserves retain their real value. Current challenges  To conclude the subject of investment policy, I would now like to look at two key challenges facing us. The first is to cope with the present growth in the balance sheet and to facilitate further growth, should this be necessary. The SNB has continuously adapted its investment policy to changing circumstances. It has steadily expanded its investment universe in terms of investment category, investment market and currency. This means that foreign currency purchases can be quickly absorbed. Furthermore, the addition of new investment categories enables broad diversification, which helps to preserve the value of the currency reserves. This is particularly true of equities.