adhering to the minimum exchange rate would have jeopardised the snb ’ s ability to conduct monetary policy and fulfil its mandate in future. this would have saddled the swiss economy with longer - term costs that would have been out of all proportion to the benefits of continuing to enforce the minimum exchange rate of chf 1. 20 per euro. with the international low interest rate environment, monetary policy faces big challenges. overall, the swiss franc is significantly overvalued. negative interest helps to make investments in swiss francs less attractive and thereby correct this overvaluation over time. the snb will continue to take account of the exchange rate situation, and its impact on inflation and economic developments, in formulating its monetary policy. it will therefore remain active in the foreign exchange market, as necessary, in order to influence monetary conditions. ladies and gentlemen, thank you for your attention. bis central bankers ’ speeches

##s are affected by supply and demand on the bond market, which can have either positive or negative effects on risk premiums. in actual fact it is probable that risk premiums can be positive as well as negative and that they fluctuate a great deal over time in a rather irregular way. this makes it difficult to adjust market rates in a way that excludes the effects of risk premiums and reveals expectations concerning future interest rates. normally, it may be possible to come reasonably close using standard adjustments, but when, as in recent years, the markets are highly uneasy and uncertain at the same time as the central banks are actively influencing price formation using various unconventional measures, it is very difficult to reliably estimate expectations. but is it important for us to be able to distinguish monetary policy expectations from the other factors that affect the interest rate? the answer is that it matters when evaluating the alternative courses of action for monetary policy. i and my colleagues on the executive board have, for example, discussed what would happen if the market ’ s policy rate expectations were rapidly brought into line with the riksbank ’ s repo - rate path. if we assume an immediate alignment, then the upward effect on long - term rates would depend on what measure one sees as being representative of the monetary policy expectations. in the prospera surveys in november, expectations were higher than those reflected in the forward rates but lower than the riksbank ’ s repo - rate path. if we assume that it is the prospera surveys that best reflect expectations, rather than the forward rate curve, the upward adjustment will thus be smaller, as will the effect on the long - term rates. market expectations are thus clearly an item on the list of those factors that are difficult to assess and that monetary policy decision - makers must take a stance on. the assessment of market expectations was especially critical earlier in the autumn when the variation in different measures of market expectations was particularly great, with forward rates at a much lower level than other measures. when various indicators of monetary policy the somewhat simplified term risk premium is used throughout instead of the more correct term maturity premium. the price gain made on a long - term bond if the short - term interest rate is lower than expected is, on the other hand, somewhat higher than the price loss that will be made if the short - term interest rate is to a corresponding extent higher than expected. this gives rise to something called convexity effects, which indicate negative risk premiums.