the independence of the central bank is enshrined in the federal constitution. this means that the snb may neither accept nor seek instruction from politics or other quarters. the constitution also states that the snb shall pursue a monetary policy serving the interests of the country as a whole. the national bank act sets out this task and stipulates that the snb is to ensure price stability and in so doing take due account of economic developments. to this end, the snb has suitable and effective instruments to influence the interest rate level as well as the exchange rate, and thereby monetary conditions. the appropriateness of monetary conditions determines whether price stability can be ensured in the long term. however, why is a task of such economic significance as monetary policy delegated to an independent institution in the first place? page 2 / 5 the most important reason is that governments generally have an incentive to use monetary policy for reasons other than price stability. for example, governments may have an interest in stimulating the economy before an election. governments may want to finance public spending via the central bank ’ s banknote printing press. when monetary policy pursues such objectives, over time it inevitably leads to high inflation. an independent central bank, however, is not subject to the same incentives and is protected from the influences of government. it can – and must – therefore devote its full attention to the mandate of ensuring price stability. the independence of the central bank is thus based on the conviction that price stability is desirable for society as a whole and that it can only be ensured over the long term by a monetary policy that is protected from political influence. in many currency areas, independence is therefore tightly coupled with the mandate of price stability. this is also the case in switzerland. to legitimise its independence, the lawmakers have deliberately given the snb a narrow and clearly defined mandate. they also place upon the snb the duty of accountability of the fulfilment of its mandate. pursuing objectives that go beyond the core task of monetary policy would undermine the legitimacy of the snb ’ s independence and thus endanger it over time. focus on price stability the institutional framework of the snb is in line with both of the principles of regulatory policy i have described, namely independence from politics and a focus on monetary policy. in recent years, time and again these principles have been consciously or unconsciously questioned by some in politics and among the public. this has seen calls from politicians for the snb to directly finance government tasks

speech 23 september 2022, 6. 00 pm safeguarding the principles of regulatory policy speech at the university of lucerne thomas j. jordan chairman of the governing board * swiss national bank lucerne, 23 september 2022 © swiss national bank ( speech given in german ) * the speaker would like to thank christoph hirter and tanja zehnder for their support in preparing this speech. he also thanks claudia aebersold, petra gerlach, carlos lenz, alexander perruchoud and the snb language services. page 1 / 5 ladies and gentlemen today ’ s event focuses on the question ‘ is monetary policy still regulatory policy today? ’. i congratulate the university of lucerne on choosing this important topic. discussions surrounding regulatory policy have faded somewhat into the background of late. for the swiss national bank, however, the principles of regulatory policy – in particular those concerning monetary policy – remain of great significance. i am pleased to give you our view on this topic. in my remarks, i will therefore pay special attention to switzerland and the snb. first, i will look at why, for the snb, the two regulatory principles of a clear focus on ensuring price stability and independence from politics are closely related. i will then show why these principles are contradicted by a number of recently launched political initiatives. to conclude, i would like to explain the snb ’ s current monetary policy. narrow mandate and independence as foundation in general, regulatory policy comprises all measures which a government puts in place to create appropriate framework conditions for the longer - term development of the economy. if, in doing so, the government follows sensible principles, it creates conditions in which the economy can optimally develop its potential and the prosperity of the population increases over time. an essential component of good framework conditions, and of good regulatory policy, is price stability. in the absence of price stability, the smooth functioning of an economy is inconceivable. inflation as well as deflation hinder the steering role of prices in ensuring that labour and capital are used as productively as possible. inflation also reduces household purchasing power and especially impacts the more vulnerable sections of society. in order to ensure price stability in the long term, two principles of regulatory policy are key : - first, price stability must be the fundamental guiding principle of monetary policy - and second, a central bank must be independent from politics. both of these principles are today reflected in the legislation of many countries. in switzerland,