This occurred, in part, because of the rise in gasoline and food prices that pushed up consumer price inflation last quarter and reduced the amount of income available for other household purchases, a pattern that continued to be evident in retail sales for April. High energy prices have contributed to weaker consumer confidence, which also may have negatively affected consumer spending. However, the weakness of real output growth in the first quarter probably will prove temporary. Although manufacturing production fell in April, largely because of supply disruptions associated with the earthquake in Japan, business survey indicators, including the New York Fed’s own Empire State Manufacturing Survey, generally continue to signal growth, suggesting that production should soon return to more robust growth. And financial conditions have continued to improve, albeit gradually. The temporary reduction in payroll taxes and other fiscal measures also are providing support to demand. In addition, demand abroad – particularly in Asia – remains robust, supporting our exports. Most importantly, the labor market has shown further improvement, as demonstrated by the latest employment report. Although payroll job growth has been subdued during most of this recovery, the latest figures show the economy added 244,000 jobs in April – and an average of 233,000 over the past three months. While the unemployment rate – which is based on a different survey – ticked higher last month to 9 percent it is nonetheless 0.8 percentage points lower than it was in November, a relatively rapid decline by historic standards.

We introduced this concept exactly three years ago. You are acquainted with the main elements: definition of price stability, inflation forecast as main indicator and target range for the three-month Libor rate as operational target. Overall, our experience with our monetary policy concept has been good. Recently, this experience was discussed at an internal conference. Since the new concept was adopted, we have widened the basis of our monetary policy decisions and further developed our analysis of indicators and models. The more extensive use of relevant information enabled us to react more swiftly and with more foresight than formerly to changes in the economic situation. Our monetary policy concept met with a positive public reception in Switzerland. The same applies to the financial markets and international organisations such as the IMF and the OECD. The concept has vastly improved transparency. By publishing studies on internal decision-making processes and the forecasting models used, we have made further relevant information accessible. The public is thus in a better position to understand the reasoning behind monetary policy decisions. 2  BIS Review 73/2002  So far, we have published our inflation forecasts regularly in June and December. We should like to take this a step further and will in future publish an updated inflation forecast after every quarterly assessment of the situation. This will further help to improve transparency. From 2003 onwards, we will also inform the public of our monetary policy by publishing new inflation forecasts in March and September.