It counters the risk of an undesirable appreciation and, in turn, the associated risks to price and economic developments. Conclusion Ladies and gentlemen, following the discontinuation of the minimum exchange rate of CHF 1.20 to the euro almost a year ago, Swiss competitiveness came under pressure in the short term. Yet Switzerland’s position among the leaders in major international rankings clearly shows that, over the long term, exchange rate developments are only one factor shaping competitiveness. A more decisive role is played by the existence of a strong network of location-specific factors which have been established, nurtured and honed over several decades. By fulfilling its price stability mandate, the SNB contributes substantially to perpetuating one of these factors – macroeconomic stability. In this regard, a monetary policy geared towards flexible exchange rates has, in principle, stood Switzerland in good stead over the last 40 years. Under certain conditions, however, the SNB is prepared to intervene directly in the foreign exchange market. This applies especially in the prevailing environment. Whether, and to what extent, foreign exchange market intervention is called for requires careful deliberation, and consideration of the international environment. Prior to the discontinuation of the minimum exchange rate, international developments had caused the euro to lose considerable ground against all major currencies; the minimum rate had thus become unsustainable. We appreciate that the exchange rate situation since then has presented you all with a huge challenge. Our decision was inevitable, however, to guarantee the SNB’s continuing ability to conduct an effective monetary policy.

An international economic crisis often heralds an inflow of domestic and foreign capital to the Swiss franc, which has acquired a reputation as a safe haven on account of its historical behaviour. In other words, in uncertain times, the franc is seen as an anchor of stability, and is therefore much in demand. The currency can thus experience a strong short-term appreciation as a result. At the same time, a weak global economy can put pressure on sales volumes for the Swiss export industry. This increases the risk that production capacities cannot be fully utilised, that unemployment will rise sharply, and that the Swiss economy as a whole will slide into crisis. If an appreciation threatens macroeconomic stability in Switzerland through these channels, this has consequences for monetary policy. When conventional instruments reach their limits, the SNB has to resort to other tools in order to fulfil its mandate (cf. chart 11). First and foremost among these are foreign exchange market interventions. Since 2009, the SNB has, as you know, used this tool in a number of ways, purchasing foreign currency amounting to nearly CHF 500 billion. Between September 2011 and January 2015, for example, the SNB used this tool to enforce a minimum exchange rate against the euro. In this regard, I feel it is important to stress that considerable risks accompany on such interventions. First, market interventions aimed at preventing an appreciation expand the SNB’s balance sheet.