Since the last monetary policy assessment, the exchange rate and interest rate conditions have changed substantially. This has considerable repercussions for the inflation and growth outlook in Switzerland. Global economic outlook I will now present our assessment of the global economy. The international economic environment is developing largely in line with our previous expectations. The global economic recovery is continuing. In the fourth quarter of 2014, growth in the US remained above potential. The favourable momentum of the economy there is also reflected in the sound growth in employment. The economy picked up somewhat in the euro area. This was primarily due to strong quarterly growth in Germany. In Japan, too, demand increased. By contrast, economic developments in the major emerging economies were mixed. Consumer price inflation edged down worldwide due to lower oil prices. In many advanced economies, inflation moved into negative territory at the beginning of 2015. During the course of the year, the growth of the global economy is likely to firm gradually. Several factors are supporting this growth. First, the significant decline in oil prices is helping to increase demand. Second, monetary policy in the advanced economies remains very expansionary. The euro area, in particular, is likely to benefit from the further decline in interest rates as well as the marked depreciation of the euro. Recently, an easing in European banks’ lending conditions, which were very restrictive, has also been observed. BIS central bankers’ speeches  1  Despite these favourable developments, the outlook for the global economy is still uncertain.

At that time, the global economy was still dealing with the immediate effects of the financial crisis, and the Swiss franc was significantly overvalued against all currencies. The international economic environment is now much more positive. Inflation and economic outlook for Switzerland The change in the exchange rate situation also alters our assessment of the inflation and economic outlook for Switzerland, which I will outline for you now. As a result of the discontinuation of the minimum exchange rate, the inflation outlook has again declined significantly. For the current year, we have reduced our inflation forecast from –0.1% to –1.1%. Together with the sharp fall in oil prices, the appreciation of the Swiss franc since the discontinuation of the minimum exchange rate temporarily moves inflation further into negative territory. Inflation reaches its low point in the third quarter of 2015, at –1.2%. 2  BIS central bankers’ speeches  Thereafter, forecast inflation rises more rapidly than in the December forecast, due to the interest rate reductions since the last monetary policy assessment. Nevertheless, in 2016, inflation will amount to –0.5%, which is 0.8 percentage points lower than in the December forecast. Not until 2017 will inflation move into positive territory again, at 0.4%. The conditional forecast assumes that the three-month Libor remains at –0.75% over the entire forecast horizon, and that the Swiss franc weakens. The inflation forecast shows that the period of negative inflation is temporary. Sustained negative inflation, or even a deflationary spiral, is not to be expected.