keep interest rates at an appropriate level in order to guarantee price stability. on the other hand, they have to closely monitor the impact of this policy on the credit cycle and financial stability. in the case of the snb, contributing to the stability of the financial system is part of its statutory mandate. let me explain this point using the current situation in switzerland. internationally, interest rates have followed a downward trend for many years and are currently at low levels. 20 in the case of switzerland, this development caused the interest rate differential against other countries to narrow. along with occasionally strong capital inflows during the financial crisis, this fall in the interest rate differential has led to substantial swiss franc appreciation and a highly valued swiss franc ( cf. slide 18 ). in order to ensure price stability in switzerland and to create appropriate monetary policy conditions in this environment, the snb has had to keep interest rates low for several years now ( cf. slide 19 ). a higher interest rate level domestically would result in further appreciation of the swiss franc. this would cause a slowdown of economic growth and put the prices of goods and services under pressure. if this downward pressure on prices were to continue for a prolonged period, price stability would be jeopardised. the low reference rate maintained by the snb is therefore necessary from a monetary policy perspective in the context of the low interest rate environment worldwide and the strong swiss franc. at the same time, the persistently low interest rate environment presents risks to financial stability. this applies first and foremost to the real estate and mortgage markets. like global interest rates, mortgage rates in switzerland have been on a downward trend for some 25 years. consequently, significant imbalances have built up on the real estate and mortgage markets. this is evident when we look at the developments in both markets since 2000 ( cf. slide 20 ). on an inflation - adjusted basis, prices for single - family houses have risen by more than 50 % overall. the volume of outstanding mortgages has almost doubled over the same period. these strong rises on their own do not prove the build - up of imbalances – the increases can be partly explained by fundamentals such as solid population growth. since 2000, this has amounted to approximately 18 %. a growing population produces a demand for more housing. as land for building development is limited, this puts upward pressure on real estate prices. at the same time, demand for mortgage loans grows. 21 both structural and cyclical

lending? stephen cecchetti sums it up as follows : “ debt is a two - edged sword. used wisely and in moderation, it clearly improves welfare. but, when it is used imprudently and in excess, the result can be disaster ” ( cf. slide 27 ). 27 i myself have compared lending not with a double - edged sword, but with food. a balanced diet is essential for survival. excessive and unhealthy eating, however, can become a problem. judicious borrowing and lending is an essential foundation of a flourishing economy. excesses on the credit market, by contrast, can lead to crises and, as a result, cause extensive damage to the economy as a whole. it is therefore important that banks, households and companies always exercise sufficient caution and restraint at the ‘ credit buffet ’. equally, it is just as important that the snb carefully analyses developments on the credit market and makes optimal use of the tools at its disposal in order to mitigate any risks to financial stability as far as possible. the overall subdued economic growth in switzerland over the last two years and lower net immigration are also explanations for the recent restrained momentum on the credit and real estate markets. cecchetti et al. ( 2011 ). the international monetary fund ( imf ) came to a similar conclusion regarding household debt in its latest financial stability report : household borrowing promotes growth in the short term. in the medium term, however, too high a level of household debt reduces economic growth ( imf, 2017 ). page 14 / 16 bibliography assenmacher - wesche, k. and s. gerlach ( 2008 ), financial structure and the impact of monetary policy on asset prices, snb working papers, 2008 – 16, september. bcbs ( 2010 ), basel iii : a global regulatory framework for more resilient banks and banking systems, bank for international settlements, december. bean, c. et al. ( 2010 ), monetary policy after the fall, presented at the federal reserve bank of kansas city ’ s symposium on macroeconomic challenges : the decade ahead, jackson hole, wyoming, 26 – 28 august. beck, t. ( 2011 ), the role of finance in economic development : benefits, risks, and politics, center discussion paper, 2011 – 141. boissay, f. et al. ( 2016 ), booms and banking crises, bis working papers, 545, february. buttiglione