not seen for 15 years. this was a matter for concern, as there was a risk that such a level would alter households ’ inflation expectations, potentially leading to a sharp rise in nominal wages at year - end and resulting in a certain stickiness of inflation. however, these two elements behind the recent rise in inflation have since reversed. first, oil prices collapsed, falling below the usd 50 mark in mid - november after peaking at usd 145 in early july. the plummeting oil price can be explained both by a drop in global demand as a result of the economic slowdown we have just described, and by the unwinding of speculative positions. second, the swiss economy will soon be operating below potential, and we will see a renewed rise in unemployment. this situation will have a moderating effect on both price and wage - setting behaviour. thus, we are now forecasting – as the graph presentation will show in just a moment – that inflation will decline almost continuously throughout 2009. despite the interest rate cuts made since october and the cut announced today, inflation will remain low in 2010 and 2011. as of now, and for the current forecast horizon, upside and downside inflation risks have become symmetrical. monetary policy decision we have just explained the rationale behind our recent monetary policy : first, the global economic situation has worsened, which will hit the swiss economy as from this quarter, and in particular next year. by contrast, the inflation outlook has improved appreciably. this has increased the snb ’ s room for manoeuvre. finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. these are the considerations that have prompted today ’ s decision to cut the three - month libor target range by another 50 basis points. given the expected deterioration in the swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. with this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. inflation forecast chart how has our inflation forecast been revised? the dashed red curve on the chart represents the new forecast. it covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three - month libor remains unchanged at 0. 5 % over the forecasting period. for purposes of comparison, the dash - dotted green curve

meaning relatively long periods of higher and then lower productivity growth. if this is possible, then i can examine these cycles for regularities related to investment booms and equity price surges, followed by retrenchments in investment and corrections in equity values. i should note that whenever i come up with difficult assignments like this, i immediately turn to our staff to do the heavy lifting and, as usual, they didn't disappoint. i have to begin with some disclaimers. first, the pre - world war ii data are not as good and not as detailed as the postwar data, and different researchers put forward competing sets of historical data. so uncertainty is greater when it comes to dating episodes, comparing amplitudes from one episode to another, and, especially, going beneath the surface to look at other details of the experience. second, the results of the historical tour are intriguing but not definitive. i don't want to oversell, but i do think some earlier experiences help put recent developments in perspective. chart 1 plots the level of labor productivity from 1889 to 2000 and chart 2 presents a summary of productivity growth over some interesting sub - periods that were judgmentally identified. average labor productivity growth over the entire period was 2 percent. so we have, of course, periods of above and below " average " productivity growth. from 1889 to 1995, the duration of the periods shown in the figures is ten to twenty - eight years, averaging about twenty - one years ; leaving out the one short period, 1917 to 1927, the average duration of the other periods is twenty - four years. labor productivity growth during the high - growth periods averaged just about 3 percent a year, compared to just over 1 - 1 / 2 percent per year during the slower - growth periods. this is interesting since we have transitioned from a long period of 1 - 1 / 2 percent growth, from 1973 to 1995, to high - end estimates of 3 percent today. of course, high - growth periods need not necessarily have similar growth rates ; and the same with low - growth periods. each episode depends on the character of the innovations in play. to my eye, the charts suggest a sequence of waves in labor productivity, periods of rapid growth followed by periods of more sluggish growth. also looking at a long period of u. s. history, but stopping before the acceleration in productivity in the second half of the 1990s, and focusing on growth in multifactor productivity, professor robert gordon