In the weeks before 15 January, the level of intervention needed to maintain the EUR/CHF minimum exchange rate on the foreign exchange markets was already high and climbing rapidly. The further depreciation of the euro against the dollar after 15 January, and following the ECB’s decision on quantitative easing shortly afterwards, is an impressive illustration of how enormous the additional pressure would have been to maintain the minimum exchange rate. Had we delayed the discontinuation of the minimum exchange rate, this would only have been at the expense of an uncontrollable expansion of the SNB balance sheet – by hundreds of billions of Swiss francs, and potentially several times Swiss GDP. Such an expansion would have severely impaired the SNB’s future ability to conduct monetary policy and substantially jeopardised the fulfilment of its mandate in the long term. Moreover, given the fact that the minimum exchange rate was no longer sustainable, further intervention would have been pointless, and the magnitude of the associated losses could not have been justified. Following the discontinuation of the minimum exchange rate, the Swiss franc initially appreciated sharply against all currencies, before weakening again somewhat in recent weeks. Overall, the Swiss franc is still significantly overvalued. We expect that this will be corrected with time. We are aware that the new situation presents the Swiss economy with great challenges. Nevertheless, it cannot be compared with conditions before the introduction of the minimum exchange rate.

This is in line with surveys on inflation expectations. Although survey respondents now anticipate that inflation will be significantly lower, their expectations remain in positive territory for the medium term. With the new exchange rate situation, conditions for the Swiss economy have become more difficult. In the past, entrepreneurs and employees have always found ways to deal with a strong Swiss franc, thereby demonstrating, time and again, their great flexibility. Nevertheless, every appreciation represents a fresh challenge with an uncertain outcome. Therefore we have great respect for the difficult tasks which the economy now faces. In this regard, I would like to say a few words about the economic situation in Switzerland. In the fourth quarter, the Swiss economy again grew faster than expected. On the output side, growth was relatively broad-based, with manufacturing being the main driver. Value added also rose significantly in the banking industry and the public sector. On the demand side, both consumption and equipment investment recorded favourable developments. By contrast, exports of goods and services stagnated. In December, the SNB expected annual growth of some 2% for 2015. With the appreciation of the Swiss franc since mid-January, this forecast has had to be revised. A noticeable weakening in the economy may be expected, particularly in the first half of the year. For the year as a whole, the SNB now only expects real GDP to increase by just under 1%. Given this weakening, appreciable underutilisation of production capacity may be expected in the short term. Unemployment is likely to increase moderately.