The Swiss franc temporarily appreciated immediately following the outbreak of the war in Ukraine. The trade-weighted Swiss franc exchange rate, however, was recently below its level at the beginning of the year (cf. chart 4). Adjustment of the threshold factor I would now like to discuss the lowering of the threshold factor from 30 to 28 as mentioned earlier by Thomas Jordan. With this technical adjustment, which will take effect from 1 July 2022, we will ensure that sufficient amounts of sight deposits are subject to negative interest, and that the latter is being passed on to the money market as intended. From March 2022, upward pressure built up on the short-term rates on the secured money market. This stemmed from the fact that the exemption thresholds had risen over time due to the dynamic calculation model, which meant that there were no longer sufficient amounts of sight deposits subject to negative interest. To keep the secured short-term money market rates close to the SNB policy rate, the SNB provided additional liquidity to the money market via repo transactions as a temporary measure. However, given that the increase in exemption thresholds is structural in nature, it is appropriate that we lower the threshold factor. This will result in the secured short-term money market rates being close to the SNB policy rate again without the SNB having to regularly provide larger amounts of liquidity. The SNB will continue to regularly review the basis for calculating the exemption threshold and adjust it as necessary.

Since the unprecedented sell-offs in May, there have been some recent corrections to the initial overreactions. Nevertheless, capital movements and asset prices continue to be volatile and pose headwinds to growth and financial stability. The summer period provided a brief respite and provided investors with more time to be selective, not treating all EMEs as one single asset class. Economic fundamentals became a primary consideration for assessing in which market to remain invested. We trust that Thailand will continue to receive the attention of foreign investors because of our sound fundamentals and attractive prospects. These, notwithstanding the current soft patches as the economy consolidates and work on its long term competitiveness agenda. Role of monetary and financial policies in safeguarding stability Long before the Subprime and the Eurozone crises, Thailand had our own economic crisis of 1997. We experienced a setback that took us more than half a decade to recover. Since then we learnt the virtue of moderation and prudence. Firms had to deleverage, banks recapitalized, regulatory standards, governance reforms and bank lending practices have improved markedly. The government’s fiscal framework was also strengthened following the fiscalization of the costs of financial sector restructuring. Years of hard work and reform efforts paid off and laid the foundation for a more diversified and competitive economy. The availability of policy space both in the fiscal, monetary and financial policies, helped ensure a much needed domestic source of growth when global trade collapsed in 2008. Timely government stimulus helped shore up domestic demand.