monetary policy. in the current global context, switzerland ’ s economic situation does not justify any strengthening of monetary conditions and this should remain the case for the foreseeable future. the snb continues to enforce this minimum rate with the utmost determination and remains prepared to buy foreign currency in unlimited quantities for this purpose. from a conceptual perspective, the minimum exchange rate is not a quantitative easing measure and most of my generic comments do not strictly apply to the swiss case. nevertheless, the risks associated with this measure do, to a certain extent, resemble those i just described. the first of these risks is that the minimum exchange rate may superficially seem like a simple or straight - forward measure, which may in turn give the impression that monetary policy is a catch - all problem - solver, i. e. that it is almighty. this is clearly not the case. monetary policy has neither the capacity nor the mandate to protect the swiss economy from all the shocks to which it is subjected. the aim of the minimum exchange rate is to avert the worst possible developments in zero interest rate environment. it is not a response to each and every challenge with which the swiss economy is faced, nor can it be implemented at any desired level, free of any risk. the snb ’ s mandate is still to ensure price stability. the minimum exchange rate has decreased the deflationary and recessionary risks associated with a massively overvalued currency. it is entirely in line with our mandate. furthermore, there is no risk of inflation in switzerland for the foreseeable future. however, the snb does recognise that the long period of low interest rates we are experiencing constitutes a danger to the stability of the financial system. the domestic credit and real estate markets are vibrant and there are concerns about the possible build - up of imbalances, which could eventually lead to price corrections and substantial losses in the swiss banking sector. there is no doubt, however, that, in the current context of global economic indications of downside risks to the swiss economy, current interest rate levels and the minimum exchange rate are vital. any concerns about the housing market must, therefore, be addressed by alternative means. the snb thus advocates the introduction of a “ countercyclical capital buffer ”, a macroprudential tool targeted at the specific situation we are experiencing. if the snb ’ s recommendations are implemented, the banks will be legally obliged to meet specific equity capital requirements as soon as certain indicators on the

may 2012. bis central bankers ’ speeches economic situation that is deemed “ unsatisfactory ”. this could result in central banks being perceived as all - powerful, though such expectations are far from realistic. troubled financial markets and dangerous economic circumstances required the implementation of exceptional measures. even if these measures have a welcome impact in the short term, central banks must remain focused on their core mission, which is to ensure price stability. this is their long - run contribution to economic well - being. monetary policy does not create wealth in and of itself. it is the innovative and entrepreneurial strengths of the private sector, not short - term monetary policy measures, that are the engines of real sustainable growth. could the short - term liquidity - creating measures pose a risk for price stability? this risk is often alluded to, and central banks are acutely aware that any measures must be rigorously and repeatedly assessed to prevent any mid - term resurgence of inflation. in any case, there are well - identified means of quickly reversing the effects of an abundance of liquidity, though it is true that the timing of such “ exit ” measures is a matter of delicate monetary policy assessment. today, however, abundant liquidity and extended periods of low interest rates are recognised as posing a risk to financial stability. one of the lessons of the recent crisis is that price stability is not sufficient for financial stability. many central banks are therefore placing greater weight on financial stability concerns in their decision - making processes. to this end, several now envisage the use of specific new ( “ macroprudential ” ) instruments to directly address the risks to financial stability. it is also worth considering whether central banks ’ recent activism could undermine their independence. several critics claim that, by implementing measures such as quantitative and credit easing, central banks have, at times, adopted “ quasi - fiscal ” policies and that the boundaries between fiscal and monetary policy were, thus, blurred. yet, central bank independence is a delicate democratic concept. its objective is to prevent temporal inconsistencies in the policies pursued from leading to results that could harm the economy as a whole. in other words, independence enables central banks to focus on price stability in the long - term interests of a country, as opposed to prioritising the short - term demands of specific political or economic interest groups. at present, the use of unconventional measures is largely motivated by the fact that monetary policy is at the zero lower bound and fiscal policy options are very