; since the start of the year alone it has increased by approximately 40 basis points. interest rates, which have reached a relatively lower level in this country, to some extent mitigate the economic burdens associated with the appreciation. they have probably also contributed to the slight recovery of the euro vis - a - vis the swiss franc in the past few days. in the first half of 2002, capital market rates were influenced by economic expectations in the united states. the positive economic data in march triggered a vigorous rise in long - term us interest rates by approximately 50 basis points within a very brief time. with economic indicators below expectations since april, long - term yields fell back to their mid - 2001 level. the expectations reflected in the futures markets concerning the development of money market rates – and therefore also monetary policy – have undergone a marked downward adjustment, notably for the us dollar, but also for the euro and the swiss franc. hopes of a vigorous and rapid economic recovery have given way to a more realistic assessment. the snb as asset manager in the context of its statutory mandate, the national bank manages sizeable assets ( table 1 ). in may 2002, their market value exceeded sfr 100 billion. the free assets ( sfr 21 billion ) are to be withdrawn from the national bank and allocated to other purposes. mr blattner will provide details on the management of the free assets. the monetary assets ( sfr 86 billion ) serve monetary purposes. claims from repo business ( sfr 16 billion ) reflect our money market activities on the assets side of the balance sheet, while swiss franc securities ( sfr 5 billion ) are available for absorption repos if necessary. foreign exchange reserves ( sfr 41 billion ) are at the centre of our activity as asset managers. at the end of 1997, the leeway previously granted solely for money market investments was legally extended. this provided a possibility to spread fixed - interest investments more evenly across various maturities and currencies and to widen the range of instruments. among the currencies ( graph 1 ), the us dollar and the euro predominate with shares of 42 % and 46 % respectively. the maturities of the investments extend over the entire interest rate curve, with the average maturity being around five years. in the debtor categories, government paper predominates, accounting for a share of more than 50 %. the rest comprises claims against international organisations and banks or bank - like borrowers with an above - average

franc. in a particularly difficult international environment with deflationary trends we allowed the three - month libor to finally fall to a historic low of 0. 25 % in march 2003. for five quarters it persisted at this level. today ’ s adjustment of our monetary policy should not be seen as a changeover to a restrictive policy. our interest rate increase is merely to be regarded as an appropriate step towards more neutral monetary conditions following a lengthy period of extraordinary circumstances. it is an indication that we view economic prospects more optimistically and that we trust the economic upswing in switzerland to be robust. our monetary stance remains expansionary. every forecast and every decision is fraught with uncertainty and risks. should the economic recovery be delayed due to unexpected events or should the swiss franc appreciate markedly, we shall react appropriately. as in the past, the swiss national bank shall keep all its options open. observed inflation june 2004 inflation forecast on march 2004 with libor at 0. 25 % and of june 2004 with libor at 0. 5 % inflation forecast of june 2004 ( 98 kb )