welfare depends critically on how well we master these challenges. page 3 / 5 berne, 15 december 2016 thomas jordan news conference exchange rates, interest rates and inflation expectations i will now review changes to monetary conditions since the middle of the year. the last half year has been shaped by the surprising outcomes of a number of political events. the brexit decision led to a significant devaluation of the pound sterling and generated upward pressure on safe - haven currencies. thanks to our willingness to intervene in the foreign exchange market, we were able to cushion the effect of the additional pressure on the swiss franc, which can often build up in such phases of increased market volatility. equally, neither the us elections nor the italian constitutional referendum caused any significant changes in the value of the franc overall. on a trade - weighted basis, the real external value of the franc hardly changed over the course of the year. an analysis of nominal exchange rates since our last assessment in june shows that the franc has appreciated slightly against the euro. against the dollar, meanwhile, it has depreciated somewhat. one reason for the appreciation of the us dollar against the swiss franc and most other currencies is the substantial increase in long - term interest rates in the us, particularly following the presidential election. long - term yields on swiss confederation bonds have also risen, but yield increases have been less pronounced here than in the us. the interest rate differential with the us has thus widened. short - term rates in switzerland are virtually unchanged, with the yield curve steepening as a result. inflation expectations in switzerland remain stable. most households, companies and financial analysts anticipate that inflation will be slightly positive in the short to medium term. this view is substantiated in the surveys conducted by the snb ’ s delegates for regional economic relations. despite weak inflation in recent years, long - term inflation expectations have changed very little and remain firmly anchored in the range which we equate with price stability. monetary policy outlook ladies and gentlemen, let me summarise my key points. even in times of turbulence such as those witnessed in the last six months, our monetary policy has proved its worth. the negative interest rate has partially restored the traditional interest rate differential with other currencies and has thus made swiss franc investments less attractive. during periods of high volatility, our willingness to intervene in the foreign exchange market has a stabilising effect on the exchange rate.

will be used. up until now, there has been no major influx of people into switzerland, although this may be attributable in part to the weak labour demand, which in turn is due to the current economic situation. in the medium term, we expect the proportion of labour coming from the eu to switzerland to increase. however, opening up the swiss labour market also gives rise to fears. people are concerned that swiss salary levels will come under pressure and that employment conditions will deteriorate. in an effort to counteract any serious repercussions on the swiss labour market, the authorities have implemented a number of accompanying measures. these, however, will not be able to completely prevent competitive pressures in switzerland from intensifying. the attempt to avert any wage adjustments by introducing minimum wages across the board, for instance, would be counterproductive. switzerland would be unable to benefit from the opportunities that this opening up presents. the swiss labour market would become less flexible, and the country would lose one of its most crucial locational advantages. it is more important to ensure that the goods markets also adjust and the inflated price level drops - this can be achieved by systematically promoting competition and by reducing state regulations. the eastward enlargement of the eu inevitably begs the question as to whether the rocky bilateral road on which switzerland has set out will also be a fit for the challenges of the future. accession to the eu is currently not an issue, however. reasons for the scepticism of the swiss people in this regard are manifold. for instance, switzerland would have to give up the swiss franc if it joined. this in turn would mean a higher interest rate level and an end to our autonomous monetary policy. it was precisely in the past three difficult years, that the possibility of conducting an independent monetary policy proved advantageous. at the beginning of 2001, the swiss national bank relaxed its monetary policy before the european central bank and, in the following months, also cut its short - term interest rates more drastically than the ecb. in march 2003, we lowered our key rate, the three - month libor rate, to almost zero. this was in reaction to the deflationary risk in the wake of the strong appreciation of the swiss franc. we have, in the meantime, pushed our interest rates back up slightly. our economy has now returned to its growth path and the risk of deflation has been overcome ; so there is no longer any reason to keep the short