can the federal reserve best meet its statutory objectives with its existing monetary policy strategy, or should it consider strategies that aim to reverse past misses of the inflation objective? - 10 2. are the existing monetary policy tools adequate to achieve and maintain maximum employment and price stability, or should the toolkit be expanded? 3. how can the fomc ’ s communication of its policy framework and implementation be improved? i would like to spend a few minutes discussing the first topic. because interest rates around the world have steadily declined for several decades, rates in normal times now tend to be much closer to zero than in the past ( figure 5 ). 8 thus, when a recession comes, the fed is likely to have less capacity to cut interest rates to stimulate the economy than in the past, suggesting that trips to the elb may be more frequent. the post - crisis period has seen many economies around the world stuck for an extended period at the elb, with slow growth and inflation well below target. persistently weak inflation could lead inflation expectations to drift downward, which would imply still lower interest rates, leaving even less room for central banks to cut interest rates to support the economy during a downturn. it is therefore very important for central banks to find more effective ways to battle the low - inflation syndrome that seems to accompany proximity to the elb. in the late 1990s, motivated by the japanese experience with deflation and sluggish economic performance, economists began developing the argument that a central bank might substantially reduce the economic costs of elb spells by adopting a makeup strategy. 9 the simplest version goes like this : if a spell with interest rates near for evidence on the secular decline in interest rates in the united states and abroad, see king and low ( 2014 ) ; holston, laubach, and williams ( 2017 ) ; rachel and smith ( 2017 ) ; and brand, bielecki, and penalver ( 2018 ). see reifschneider and williams ( 2000 ) and references therein. - 11 the elb leads to a persistent shortfall of inflation relative to the central bank ’ s goal, once the elb spell ends, the central bank would deliberately make up for the lost inflation by stimulating the economy and temporarily pushing inflation modestly above the target. in standard macroeconomic models, if households and businesses are confident that this future inflationary stimulus will be coming, that prospect will promote anticipatory consumption and investment. this can substantially reduce the economic costs of el

niklaus blattner : current economic situation and monetary policy summary of a speech by mr niklaus blattner, vice - chairman of the governing board of the swiss national bank, at the 1st basel economic talks of the national bank, basel, 5 may 2006. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * switzerland ’ s economy clearly picked up pace last year. exports were the main engine for growth, while construction and consumer expenditure also buoyed up economic activity. companies were nevertheless reluctant to invest or hire new staff. the recovery was thus still patchy, and inflation risks were accordingly low. since the beginning of the year, there has been a stream of positive news from switzerland and abroad. the us and asia are still enjoying a high level of economic momentum, and in europe, too, the recovery is becoming more firmly entrenched. benefiting from the favourable international environment, the upswing in switzerland has gained a broader footing. the investment environment in particular seems much more attractive now than last year. this applies especially to northwestern switzerland. many companies in this region have stated that they now want to implement investment plans that have been put on hold for a long time. the swiss national bank expects switzerland ’ s gdp to expand by just over 2 % this year. the economic upturn does not jeopardise price stability, at least not in the short term. in the long term, however, the current low level of interest rates is not compatible with price stability. if the economy performs as expected, the national bank will further pursue the gradual adjustment of its monetary policy that has already been initiated.