thomas jordan : review of the swiss economy and global economic outlook 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, berne, 13 december 2012. * * * the swiss national bank ( snb ) is leaving the minimum exchange rate of chf 1. 20 per euro unchanged. the swiss franc is still high. an appreciation of the swiss franc would compromise price stability and would have serious consequences for the swiss economy. consequently, the snb will continue to enforce the minimum exchange rate with the utmost determination. it is prepared to buy foreign currency in unlimited quantities for this purpose. in addition, the snb is leaving the target range for the three - month libor at 0. 0 – 0. 25 %. if necessary, it stands ready to take further measures at any time. essentially, the snb ’ s conditional inflation forecast is unchanged from its september forecast. in the short term, price movements will again be subdued by a somewhat weaker economy in the euro area. in addition, the impact which past appreciation of the swiss franc is having on the price level is rather stronger than had originally been expected. from mid - 2013 onwards, the path of the new conditional inflation forecast is almost identical to that of september. the forecast is based on an unchanged three - month libor of 0. 0 % over the next three years. given this assumption, the swiss franc weakens over the forecast period. nevertheless, forecast inflation remains low for the next few years. for 2012, the inflation rate will amount to – 0. 7 %. for 2013, we expect inflation of – 0. 1 % and for 2014, 0. 4 %. in the foreseeable future, therefore, there is no risk of inflation in switzerland. the third quarter of 2012 saw weak growth and a decline in trading activity worldwide. although growth in the us economy and some of the emerging economies picked up, a mild recession persisted in the euro area. in switzerland, real gdp in the third quarter increased again following a temporary downturn. for the fourth quarter, however, we expect significant weakening in growth. consequently, economic growth in switzerland for the year 2012 is likely to remain unchanged at around 1. 0 %. for 2013, we expect growth of 1. 0 – 1. 5 %. the downside risks for the swiss economy remain considerable. although the measures announced by the european central bank (

measures taken by the ecb. however, the very low interest rates around the world are also associated with risks. the longer a low interest rate phase persists, the greater the potential danger of speculative price developments and misallocations. investors searching for yields could place increasing amounts in real estate, and this can lead, in particular, to a rise in real estate prices and thus, to a distorted pattern of incentives. momentum in the domestic residential mortgage and real estate markets remains exceptionally strong. mortgage lending continues to grow briskly compared to the economy as a whole. in addition, real estate prices, already at a high level, continued to rise. as a result, risks for financial stability increased further. my colleague, jean - pierre danthine, will give you an assessment of the situation in the financial sector from the point of view of the snb. monetary and investment policy the minimum exchange rate provides us with new challenges for our monetary policy but also for our investment policy. i would therefore like to close with a few words on our foreign currency investments. as you know, in the months may to august, in particular, we had to purchase large quantities of foreign currency in order to enforce the minimum exchange rate. consequently, the snb ’ s foreign currency investments have significantly increased. also, we cannot exclude the possibility that we will have to intervene substantially again. from the beginning we made it clear that enforcement of the minimum exchange rate was associated with risks. we are endeavouring to reduce the balance sheet risks through suitable diversification of our foreign currency investment. however, the exchange rate risk on the foreign exchange reserves is based on monetary policy considerations and the snb is therefore obliged to bear it. my colleague, fritz zurbrugg, will talk about the management of the foreign exchange reserves in his remarks. through its monetary policy, the snb serves as a buffer for the swiss economy and cushions the effect of severe shocks. because it has a long - term focus, it is in a position to carry substantial risks. this means we can react flexibly in exceptional situations in order to fulfil our mandate, which is to ensure price stability while taking due account of economic developments. bis central bankers ’ speeches