thomas jordan : 2012 – swiss monetary policy in uncertain times introductory remarks by mr thomas jordan, acting chairman of the governing board of the swiss national bank, at the swiss - american chamber of commerce, geneva, 7 february 2012. * * * the speaker would like to thank claudia strub and till ebner for their valuable support in preparing this speech. he would also like to thank enzo rossi and peter kuster for their helpful comments. introduction since last summer, switzerland has been suffering the effects of the negative developments in the global economy, and particularly the escalating debt crisis in the euro area. the uncertainty over the debt crisis led to a massive appreciation of the swiss franc during the summer months. in their search for safe financial assets, investors drove the swiss franc to an all - time high against the euro in early august, which posed an acute threat to the swiss economy and carried the risk of deflationary developments. in response, the swiss national bank ( snb ) set a minimum exchange rate of chf 1. 20 per euro in early september of last year, which corrected the overvaluation of the swiss franc to some extent. thanks to this decision, investment planning for export - oriented companies has been facilitated, and the risk of both deflation and severe structural damage to the swiss economy has been reduced. without this policy measure, the extreme overvaluation of the swiss franc and its volatility would probably have persisted. however, the situation remains challenging for large sections of the economy – even at the current exchange rate, the swiss franc is still very strong. we expect it to weaken over time, and fall back to a level more in line with its economic fundamentals. as the data show, economic activity in switzerland slowed significantly in q3 2011. exports, in particular, fell noticeably. in addition to the strong swiss franc, the general global economic outlook has deteriorated and downside risks prevail. given this difficult environment, we remain firmly committed to defending the minimum exchange rate of chf 1. 20 per euro. this commitment applies at any time, from the moment the market opens in sydney on monday to when it closes in new york on friday. we will not tolerate any trading below the minimum rate in the relevant interbank market. to enforce this policy, we are prepared to buy foreign currency in unlimited quantities if necessary. moreover, we stand ready to take further measures if the economic outlook and the risk of deflation so

in the global economy has also surprised on the upside. so, we do not yet see the well - balanced base that would give us assurance that growth is on a solid footing. this brings me to the second issue. given the performance of exports and investment, the uncertainty regarding the tax and trade policies of the us administration again factored prominently in our discussions. the bank of canada is quite used to dealing with uncertainty, and we were very deliberate in choosing how to incorporate it into our projections and policy decision. in terms of potential us tax measures, we judged in january that there was enough information available to make some initial assumptions. there are now signs that suggest implementation will be delayed, and so we have updated these assumptions. we took a different approach to uncertainty about potential us trade policies. we now have a 1 / 2 bis central bankers'speeches better sense than in january of the extremely wide range of possibilities : they include a borderadjustment tax, targeted tariffs on some products and countries, non - tariff barriers and even broader multilateral trade measures. we do not know which of these will be enacted ; their timing is uncertain ; and each would affect the global economy and canada through a different, complex set of channels. take a look at box 1 of the report for a discussion of this. although it is fair to say that the possible outcomes are almost certainly negative for canada, we cannot reliably model them at this stage. instead, we have incorporated an extra degree of caution in our forecast for exports relative to our january forecast, including the potential implications of the softwood lumber dispute. we have also been cautious with our forecast of business investment. while businesses are becoming more confident, they remain wary. when we talk with companies, many tell us that planned increases in investment are modest, or related to maintenance, rather than to expansion. overall, we project economic growth in canada to slow from an annual pace of 3. 8 per cent in the first quarter to just over 2 per cent for the remainder of the year. we project growth of just under 2 per cent in 2018 and 2019. given the stronger profile of economic activity relative to january, governing council was very focused on the third issue : how much excess capacity remains in the economy. we use a couple of different methods to gauge the amount of excess capacity, which gives us a range of estimates of excess supply. evidence from inflation data is also consistent with material excess capacity remaining. although a number of temporary factors are keeping headline