slightly against the dollar during the same period. since our march assessment, the actual depreciation of the swiss franc, i. e. weighted in terms of exports, amounts to 1. 7 %. the corresponding relaxation in monetary conditions is weakening the effects of our policy of lifting interest rates and is increasing inflationary pressure through two channels. one the one hand, it is bringing about an increase in import prices, which could have an effect on consumer prices. even though the impact of this channel may have diminished during the past few years due to increased competition, there is no guarantee that – against the current backdrop of near full employment – it will not again be reactivated. on the other hand, it is strengthening the competitive position of our economy, thereby giving exports and economic activity a boost. as a consequence, the weak franc could heighten inflationary pressure in an economy already running at full steam. on the credit market, growth in mortgage lending is slowly receding, with the current rate of increase below 5 %. the “ other loans ” category continues to expand rapidly, while matching observations of the past in comparable phases of the economic cycle. this category is now growing at a rate of about 8 – 10 %, as at the beginning of the 2000s, when their level in fact considerably exceeded the levels we are currently experiencing. m1 and m2 shrank, which is nothing out of the ordinary during a phase of rising interest rates. when this happens, savings and sight deposits are shifted into time deposits. m1 and m2 are affected by this substitution. m3, which is not affected, is growing at a rate of 2 % to 3 %, which is appropriate for an expanding economy. inflationary risks in the current environment, price stability is subject to three types of risk : the first risk is connected with the development in the price of oil. the barrel price for brent crude rose by 40 %, from usd 51. 0 in january to usd 71. 7 in may. this will lead to higher inflation during the course of the year. unlike oil price hikes between 2004 and 2006, the most recent rally took place when capacity utilisation was higher. if the current surge in oil prices were to continue, it could affect prices more easily than previously. the second risk is due to the fact that demand is growing at too rapid a pace in relation to the development in production capacity. we estimate the gdp growth rate that can be sustained without pushing up inflation – potential gdp growth – at

. in addition, more than 40 percent of respondents adopted more - restrictive terms on commercial real estate loans, compared with 26 percent in november. yield spreads on corporate loans, consistent with risk premiums observed in the corporate bond market, have also widened. adjustments in standards and pricing are clearly a necessary and important part of the transition that banks must make in moving from overly optimistic assumptions to more - realistic assessments of borrower prospects. as i have said previously, however, lenders and their supervisors, should be mindful that in their zeal to make up for past excesses they do not overcompensate and inhibit or cut off the flow of credit to borrowers with credible prospects. there is doubtless an unfortunate tendency among some, i hesitate to say most, bankers to lend aggressively at the peak of a cycle and that is when the vast majority of bad loans are made. a more disciplined, less pro - cyclical, long - term approach to lending that provides higher average risk - adjusted returns to shareholders is obviously in the self - interest of banks. it is interesting to note that the length of the current expansion, coupled with the absence of problem commercial loans until recently, has led to some depreciation in both bankers'and supervisors'skill in handling weakened or troubled credits. such problems either are a faded memory or are outside the experience of some lenders and examiners, despite the serious credit work - out problems of the late 1980s and early 1990s. as a consequence, institutions have had to brushup and re - institutionalize their policies and practices for managing weakened and problem credits, and supervisors have had to similarly bolster their training programs. recent problems have also helped vividly illustrate the longstanding virtues of sound lending practices. for example, losses related to leveraged finance loans have reminded institutions that these credits present unique challenges for an institution's risk - management systems and that proper safeguards are necessary to conduct this business prudently and profitably. leveraged borrowers, by virtue of their high interest costs and dependence on third - party funding, have a diminished ability to adjust to unexpected economic events and changes in business conditions. as a consequence, leveraged credits require more - intensive tracking and monitoring than typical commercial credits to ensure that their unique risk characteristics are adequately understood and controlled by the banking organization. institutions with sound practices translate the results of their monitoring into appropriate internal ratings, classifications, and loss recognition to develop a timely and accurate picture of their institution's