##ities in 2005, for instance, the progressive hikes in the rate of interest in the united states at a time when monetary policy in europe was characterised by a waiting - game approach. despite these potentially destabilising factors, financial markets remained relatively calm. in currency markets, the dollar picked up in the wake of tighter us monetary policy, while the yen moved only slightly against the swiss franc. the exchange rate of the euro against the swiss franc fluctuated within a narrow range, thereby reflecting the strong convergence of fundamentals in switzerland and the euro area. over the past few months, the swiss franc has even trended downward – a decline that is hard to explain given the low rate of swiss inflation as compared to the rest of europe. if this trend were to accelerate and give rise to an excessive relaxation in monetary conditions with respect to economic developments, a normalisation of interest rates would become even more essential. generally speaking, the capacity of financial markets to absorb shocks and to cope with imbalances is one result of globalisation and the progress in financial intermediation. in addition to stimulating goods markets, globalisation has also enlarged and deepened financial markets, and is doing so to a growing extent. freedom of movement of capital is now the rule between industrialised countries and is also becoming more widespread in emerging countries. this makes it easier for the deficits of one group of countries to be financed by the surpluses of the others. in itself, the greater efficiency of financial markets is an additional factor contributing to growth, and is therefore a good thing. however, it is still possible that the continued indebtedness of some countries ( due to the substantial disparity in national savings efforts ) could dangerously weaken financial markets in the event of a crisis of confidence. the stability of global financial markets last year was a positive factor for our country, with its manifold connections to the global economy and a currency that has often suffered from external monetary turbulence. however, this high level of market stability should not be regarded as permanent. there are still major underlying risks and there is no justification for diminishing our vigilance as regards possible market instability. meanwhile, companies need to remain cautious about exchange rate risks, despite the fact that the volatility of the swiss franc has been low over the past few years. for its part, the snb is aware of the vulnerability of financial markets and takes particular care to ensure that its monetary policy is properly understood by economic agents

of reserves, this would be unwise. dear shareholders dear guests the swiss national bank must retain the confidence of the population and the markets if it is to conduct its policies effectively. the cosa initiative is playing with fire. it constitutes a permanent invitation to press never - ending financial demands. it places the snb at the centre of a permanent political debate which threatens both its credibility and the effectiveness of its policies. that is why good sense dictates that it be rejected. the snb needs the support of everyone in this tricky phase and, in particular, the support of its shareholders. i would like to thank you for your attendance today, and for your continual interest in our activities.