And doing so would not even help address the various issues in any case. I see three main reasons to support this view. First, central banks do not have effective instruments for successfully pursuing structural policy objectives such as tackling climate change over the long term. Their tools are designed to influence factors relevant for monetary policy, such as interest rates and exchange rates. By contrast, the influence of our investment policy on the global financing conditions for ‘green’ or ‘brown’ companies over the long term, for example, is low. While buying green investments may increase their price, when we sell the corresponding securities for monetary policy reasons, their market price will decline again. When it comes to inequality, again central banks do not have the instruments to bring about lasting change beyond the positive impact of a stability-oriented monetary policy. An expansionary monetary policy may mitigate income inequality in the short term in that it provides support to low-income households in particular or promotes the creation of jobs in the low-wage sector. However, an expansionary monetary policy also stimulates asset prices, which then tends to exacerbate wealth inequality. The biggest problem for the more vulnerable sections of society that central banks can influence is inflation. Concentrating on price stability thus inherently constitutes the greatest contribution a central bank can make to social cohesion. While central banks do not have effective instruments for achieving structural policy objectives, other state institutions do, for example in the form of fiscal policy and regulatory measures.

The second half of my contribution will address in particular why an appropriately defined range for price stability and a narrow mandate are key factors in being able to conduct effective monetary policy over the longer term in an ever-changing environment. Here I will draw especially on the SNB’s experience, taking the Swiss perspective of a small open economy with an important currency. I. Aftershocks of the global financial crisis In the two decades prior to the global financial crisis, the nominal interest rate level had declined worldwide. On the one hand, central banks’ success in combatting inflation, coupled with cheap production opportunities resulting from an increasingly integrated global economy, had led to falling inflation rates. On the other hand, the real rate of interest had declined in many countries due to structural factors such as decreasing productivity growth and the ageing of the population. When the global financial crisis and the associated economic slump required a decisive easing in monetary policy, many central banks quickly reached the zero lower bound on interest rates. To continue to ensure an appropriately expansionary monetary policy in this situation, ‘unconventional’ measures then had to be introduced. Switzerland, too, was unable to escape these international developments. As a small open economy, in the wake of the financial crisis it was hit hard by the slump in global demand and the turbulence on the international financial markets. Our country’s situation was exacerbated by strong upward pressure on the Swiss franc.