. the national bank defines price stability in the same way as the ecb. the question thus arises whether we, too, should as a principle aim at the upper level in the range of price stability. we see no reason to make any changes in our concept. switzerland is a small open economy and the proportion of imported goods in the national consumer price index amounts to 25 %. as a result of exchange rate fluctuations, the inflation rates are significantly more volatile than in the euro area. there is therefore no sense in aiming at an excessively narrow range of inflation. such temporary fluctuations in inflation do not pose a problem for the swiss economy and should not be countered by means of special monetary policy actions. furthermore, the euro area also has the problem that there is a large spread in inflation between the peripheral countries and the countries at the centre. in striving for an inflation rate of less than, but close to, 2 % in the medium term in the entire euro area, the ecb is trying to prevent inflation in the central countries from being pushed down towards zero, or even below zero, for any length of time. in switzerland, this problem does not exist as only inflation measured in switzerland is relevant for our monetary policy. additional agreement between the federal department of finance and the snb on the distribution of profits on the free assets at yesterday ’ s meeting the bank council of the national bank agreed to an additional agreement between the federal department of finance and the swiss national bank on the distribution of profits on the free assets ( income on reinvested proceeds from gold sales ). the profit distribution of the national bank will thus increase by sfr 300 million to a total of sfr 2. 8 billion ( for the financial year 2003 ) in spring 2004. in 2005 and 2006, it will be gradually raised up to sfr 3 billion. the national bank ’ s profit distribution has so far not taken account of this income on reinvested gold proceeds. on discussing this transaction, the bank authorities of the national bank expressed their concern that it was now even more obvious that the national bank ’ s profit transfer was reaching a level that cannot be maintained in the long term. the governing board shares the bank authorities ’ concern that a later return to the “ normal level ”, which will only amount to approximately sfr 1 billion, is likely to create considerable political difficulties. from today ’ s vantage point, it cannot be ruled out, moreover, that as a result of the additional distribution on the

this is a sign that some market participants are quite confident that corporations will make a stronger showing. exchange rates underwent a revaluation too. the marked decline of the us dollar against the euro can partly be interpreted as a normalisation after the previous exaggerations, and partly be attributed to the widening disequilibrium in the balance of payments and in the us budget. moreover, given the extremely low us dollar interest rates, currency risks could be hedged at favourable conditions by concluding forward contracts - an attractive option in times of decreased risk capability. with the resulting forward sales the dollar came under further pressure. as regards the swiss franc, we have noted that the euro / franc exchange rate has for the first time reached its pre - 9 / 11 level. the price losses on equities of the past few years - the spi today is approximately 40 % below its peak - have had a significant effect in switzerland. they put pressure on both corporations and individuals, with foreseeable higher old - age provisions and nascent insecurity in this area being one of the concerns. the swiss financial sector, which makes an above - average contribution to gross national product, has been particularly hard hit by the stock market correction. the cut - backs which are now necessary in the financial sector will put a strain on the swiss economy for an extended period to come. economic activity economic activity in switzerland weakened in the first quarter of 2003. according to preliminary estimates of seco, real gross domestic product contracted compared with the previous period and was again slightly below the previous year ’ s level. the renewed deterioration in the economic situation did not come unexpectedly. it was primarily the result of the recurring downturn of the global economy, which is partly a reflection of the uncertainties in connection with the iraq war. swiss exports were down again in the first quarter, and the foreign trade contribution became distinctly negative. consumer spending had a slightly stabilising effect while investments continued to decline overall. even though geopolitical uncertainties have meanwhile largely given way, the economic situation in switzerland remains difficult. the marked deterioration in the labour market makes for more uncertainty and depresses consumer sentiment. even though there are first signs suggesting a stabilisation of demand for capital goods, corporate investment activity is still at a low ebb. despite the weaker franc against the euro, incoming orders and the order backlog stayed at an unsatisfactory level up until april. capacity utilisation in the industry