By contrast, the emerging economies presented a mixed picture. Some countries registered a decline in growth, and uncertainty regarding economic developments in China has increased. Consequently, growth was not broad-based internationally, which was also reflected in the lack of momentum in global trade (cf. chart 2). We nevertheless expect the moderate pace of global economic recovery to continue. Expansionary monetary policy and low commodity prices are supporting economic activity in the advanced economies. This is a positive development for the outlook in Switzerland. If global economic growth continues at the same moderate pace, this will help mitigate the negative effects of the strong Swiss franc. Export activity should thus become a growth driver again. Domestic demand will also support the economy. For these reasons, we anticipate that economic conditions will improve somewhat in the second half of the year. However, uncertainty remains high. For 2015 we expect real gross domestic product (GDP) to grow by just under 1%. The difference is in the differential Let us now turn to the interest rate environment. Did our decision of 15 January cause a fundamental shift in parameters in this area? No. I am, of course, aware that, since the introduction of negative interest on banks’ and other financial market participants’ sight deposits at the SNB, many money and capital market interest rates start with a minus sign rather than a plus. For instance, yields on Confederation bonds with terms of up to ten years are currently negative. So, mathematically speaking, the parameters have indeed shifted.

But what is important for the Swiss franc, and thus for the Swiss economy, is not domestic interest rates in an absolute sense, but relatively speaking – i.e. the differential between Swiss and foreign interest rates. Historically, Swiss nominal interest rates have tended to co-move with those in other countries, albeit usually at lower levels, especially when compared to the euro area. The comparatively low interest rates in Switzerland are, first, the result of low and stable inflation. Second, they provide incentives for capital outflows, which are the counterpart of the traditional current account surplus. Since the financial crisis, interest rates have dipped towards the zero lower bound in many advanced economies, so that this classic rate differential has virtually disappeared. In order to re-establish a clear differential, the SNB has lowered its reference interest rate into negative territory, exerting downward pressure on the entire Swiss interest rate curve. As chart 3 shows, using yields from Swiss and German five-year government bonds, since then the interest rate differential to other countries has widened again. Similar developments can also be observed for all other bond maturities. Thus, the situation as regards the interest rate differential has not changed since 15 January; rather, it has partly normalised thanks to the negative interest rate. So the introduction of negative interest achieved an important objective. Lower interest rates make Swiss franc investments less attractive compared to foreign investments. Of course, the interest rate differential is not the only factor behind the demand for Swiss francs.