Philipp Hildebrand: Global and Swiss economic outlook Introductory remarks by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 16 December 2010. *  *  *  The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. It is leaving the target range for the three-month Libor unchanged at 0.00–0.75%, and intends to keep the Libor within the lower part of the target range at around 0.25%. The global economic recovery is continuing. While the growth dynamic in emerging economies is vigorous, the recovery in the industrialised economies remains modest overall. Growth in Switzerland was robust in the third quarter of 2010, but the weakening of exports, in particular, points to a significant reduction in growth in the quarters ahead. The SNB expects GDP to grow by some 1.5% in 2011, following growth of about 2.5% in the current year. Monetary policy operates in an environment of heightened uncertainty. Concerns about stability in the euro area have led to renewed financial market tensions. Against this backdrop, the Swiss franc has again appreciated. Should these tensions be exacerbated and put a strain on economic developments in the euro area, this would also have a detrimental effect on the Swiss economy. If a deflation threat emerges, the SNB would take the measures necessary to ensure price stability. The SNB’s conditional inflation forecast for 2012 and 2013 is slightly below the September forecast.

Consequently, the SNB expects GDP to grow by some 1.5% in 2011, following growth of about 2.5% in the current year. Monetary and financial conditions  Monetary and financial conditions in Switzerland are shaped by the expansionary monetary policy. Since mid-September, the three-month Libor has remained fairly constant within the lower part of the target range. Yields on high-quality Swiss bonds remain at a low level, despite the latest increase. This also applies to long-term real interest rates, which are ultimately decisive in investment and consumption decisions. Historically low interest rates for corporate loans and mortgages also create conditions which stimulate domestic final demand. Concerns about stability in the euro area have led to renewed financial market tensions. Against this background, the Swiss franc has again appreciated. As shown in the survey carried out by the delegates of the SNB regional contact network and published next week in the Quarterly Bulletin, business activities of numerous companies are hampered by this development. An aggravation of the crisis in the euro area would inevitably have further negative consequences for the Swiss economy. As my colleague, Jean-Pierre Danthine, will outline in more detail later, liquidityabsorbing operations have continued since the monetary policy assessment of September 2010. As a result, bank sight deposits with the SNB have fallen further. Nevertheless, the monetary base is still significantly higher than its level prior to the financial crisis. The broader monetary aggregates have continued to expand strongly since the last assessment, and pose a potential threat to long-term price stability.