thomas jordan : the swiss national bank ’ s monetary policy decision and assessment of the economic situation introductory remarks by mr thomas jordan, chairman of the governing board of the swiss national bank, at the media news conference of the swiss national bank, zurich, 19 march 2015. * * * ladies and gentlemen it gives me great pleasure to welcome you to this news conference. following the discontinuation of the minimum exchange rate, we have decided to hold an extraordinary news conference at our quarterly assessment in march, in addition to the traditional six - monthly news conferences which will take place in june and december. in my presentation, i will explain the governing board ’ s monetary policy decision and outline our assessment of the economic situation. afterwards, my colleagues and i will be at your disposal to answer questions. monetary policy decision i will begin with our monetary policy decision. the snb has decided to leave the target range for the three - month libor unchanged at between – 1. 25 % and – 0. 25 %. interest on sight deposits at the snb remains at – 0. 75 % and the exemption thresholds remain unchanged. negative interest helps to make it less attractive to hold investments in swiss francs. overall, the swiss franc is significantly overvalued and should continue to weaken over time. the snb will continue to take account of the exchange rate situation, and its impact on inflation and economic developments, in formulating its monetary policy. it will therefore remain active in the foreign exchange market, as necessary, in order to influence monetary conditions. since the last monetary policy assessment, the exchange rate and interest rate conditions have changed substantially. this has considerable repercussions for the inflation and growth outlook in switzerland. global economic outlook i will now present our assessment of the global economy. the international economic environment is developing largely in line with our previous expectations. the global economic recovery is continuing. in the fourth quarter of 2014, growth in the us remained above potential. the favourable momentum of the economy there is also reflected in the sound growth in employment. the economy picked up somewhat in the euro area. this was primarily due to strong quarterly growth in germany. in japan, too, demand increased. by contrast, economic developments in the major emerging economies were mixed. consumer price inflation edged down worldwide due to lower oil prices. in many advanced economies, inflation moved into negative territory at the beginning of 2015. during the course of the year, the growth of the global economy is likely to firm gradually

##ble expansion of the snb balance sheet – by hundreds of billions of swiss francs, and potentially several times swiss gdp. such an expansion would have severely impaired the snb ’ s future ability to conduct monetary policy and substantially jeopardised the fulfilment of its mandate in the long term. moreover, given the fact that the minimum exchange rate was no longer sustainable, further intervention would have been pointless, and the magnitude of the associated losses could not have been justified. following the discontinuation of the minimum exchange rate, the swiss franc initially appreciated sharply against all currencies, before weakening again somewhat in recent weeks. overall, the swiss franc is still significantly overvalued. we expect that this will be corrected with time. we are aware that the new situation presents the swiss economy with great challenges. nevertheless, it cannot be compared with conditions before the introduction of the minimum exchange rate. at that time, the global economy was still dealing with the immediate effects of the financial crisis, and the swiss franc was significantly overvalued against all currencies. the international economic environment is now much more positive. inflation and economic outlook for switzerland the change in the exchange rate situation also alters our assessment of the inflation and economic outlook for switzerland, which i will outline for you now. as a result of the discontinuation of the minimum exchange rate, the inflation outlook has again declined significantly. for the current year, we have reduced our inflation forecast from – 0. 1 % to – 1. 1 %. together with the sharp fall in oil prices, the appreciation of the swiss franc since the discontinuation of the minimum exchange rate temporarily moves inflation further into negative territory. inflation reaches its low point in the third quarter of 2015, at – 1. 2 %. bis central bankers ’ speeches thereafter, forecast inflation rises more rapidly than in the december forecast, due to the interest rate reductions since the last monetary policy assessment. nevertheless, in 2016, inflation will amount to – 0. 5 %, which is 0. 8 percentage points lower than in the december forecast. not until 2017 will inflation move into positive territory again, at 0. 4 %. the conditional forecast assumes that the three - month libor remains at – 0. 75 % over the entire forecast horizon, and that the swiss franc weakens. the inflation forecast shows that the period of negative inflation is temporary. sustained negative inflation, or even a deflationary