in switzerland for some time yet, we are keeping a very close watch on developments in the mortgage and real estate markets. waning motivation for reform measures : lower interest rates mean more favourable refinancing costs for banks, companies and governments. expansionary monetary policy following a financial crisis and recession can therefore open up a welcome time window for carrying out consolidation measures, cleaning up bank balance sheets and implementing structural reform measures. however, if decision - makers have reason to believe that low interest rates will probably remain in place for a long time yet, their motivation to undertake reform measures is likely to flag. this is particularly the case in countries where reforms have been under way for many years now, but are still insufficient, and where resistance at the political level is now on the increase. here the temptation to depend on low interest rates – or even to increase political pressure on the central bank to keep interest rates low for longer than necessary – is especially pronounced. in this context, it is important not to forget that central banks cannot do everything. they cannot restructure public sector budgets and they cannot carry out structural reforms. nor can they provide substitutes for sensible fiscal policies. this area is the responsibility of other economic agents. a prosperous economy requires favourable conditions. in this respect, the contribution of central banks is to secure one of the major conditions – price stability. and inflation? this raises the question of whether the exceptionally expansionary monetary policy will lead to inflation in the long term. in most financial systems, surplus liquidity has reached historical dimensions. under normal circumstances, monetary developments of this kind would point to a rise in inflation. yet at the moment, rates of inflation in advanced economies are trending downwards. as the recent reduction in the ecb reference rate shows, concerns about deflationary trends are more predominant in the euro area at present. neither can any inflationary threats be identified for switzerland. the snb ’ s conditional inflation forecast from september ( cf. chart 10 ) shows a very small increase in inflation to 2015, despite the assumption that the three - month libor remains at zero over the entire period. explanations for this low level of inflation include the fact that the output gap is still negative in switzerland, the swiss franc is strong, and commodity prices are stable or even declining. we are keeping a very close watch on price developments, and we have the necessary instruments to correctly assess any inflation or deflation risks and counter them with appropriate measures. bis central bankers ’ speeches concluding remarks

no means the only relevant one. switzerland and the united kingdom are both nations with long - standing traditions of global integration and free trade. both nations rely fundamentally on multilateral contractual frameworks such as the one offered by the world trade organization ( wto ). our nations and our peoples live in and benefit from a global and open world. europe is and must remain part of that world. surely an open multilateral global economy must be our primary long - term commitment. the decision to join a regional agreement such as the european monetary union must be evaluated against this global backdrop. i have tried to provide you with a brief sketch of some of the salient macro - economic issues related to such an evaluation. beyond economics, both of our nations have a proud political history. ultimately, the decision to surrender national sovereignty - be it monetary or otherwise - will always be a political one. central bankers may have views as private citizens which they would presumably express at the ballot box. in the public domain, however, their responsibility should be to illustrate potential economic consequences of the ultimately political decision to join or not to join the european monetary union. conclusion ladies and gentlemen, the decision formally to join emu does not appear to be a policy issue of imminent concern in either of our two countries. in the united kingdom, the issue was indefinitely pushed back in time in june of last year. here in switzerland, it is the ratification of the second package of bilateral treaties with the european union that dominates our current external political agenda. since this contractual arrangement with our european partners was designed from the outset as a multi - issue legal document with costs and benefits spread over multiple issues, the swiss government is to be commended for insisting on negotiating the agreement as a comprehensive package and not break it down into multiple single issues. meanwhile, globalization is set to proceed. with the rapid integration of china and india into the global economy and the subsequent reorganization of production processes, global competition is rapidly increasing with changes in relative prices that become increasingly a function of global demand and supply. needless to say, the globalization path will neither be linear nor smooth. there are risks, perhaps none less so than the temptation of governments to resort to protectionism in a misguided effort to respond to the costs associated with global economic integration. in europe, integration is also proceeding. in less than a week, ten countries will join the european union. they will add twenty - five percent to europe ’ s population, twenty - three percent to europe ’ s