jean - pierre roth : switzerland - a platform for global business keynote address by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the consulate general of switzerland / swiss - american chamber of commerce, new york, 1 june 2006. * * * it is a great pleasure for me to be with you today and i would like to thank my dear friend, ambassador loretan, for hosting this lunch of the swiss - american chamber of commerce. swiss people always feel at home, here, in this fascinating city. new york is a unique place, not only because of its size, its beautiful skyline, its location, but foremost because of its openness to the world and its multiculturalism. compared to new york, is switzerland anything more than just a small village located in the heart of europe, a country of watchmakers and chocolate producers? is there anything to see other than the matterhorn and the water fountain on lake geneva? it is interesting to note that, despite the strong presence of swiss multinationals abroad and, of course, the very well - known swiss flag – thanks to the red cross flag – switzerland is largely ignored in international surveys and is almost non - existent in european statistics. “ to live happily, live out of sight! ” ( pour vivre heureux vivons caches ) is a well - known proverb. this may well be true, but it serves to fuel many cliches ; and misconceptions are generally counterproductive. let me show you the hidden side of switzerland. you will see that modern switzerland is adjusting rapidly to the changing reality of the world economy. let's consider a few facts : • with 7. 5 million people, switzerland is indeed a small country. although we have no natural resources, we have a highly developed economy and a gdp per capita that clearly exceeds the european average. contrary to the situation among some of our neighbours, our population is still growing, thanks to immigration. our foreign population now represents about 20 % of the total population and 25 % of the labour force. despite strong immigration, our unemployment rate – 3. 5 % – is relatively low. • switzerland remains a slow - growing country when compared to the united states. our weak growth performance is due in part to the full employment, the relatively high level of personal income and the limited scope for domestic investment. however, in recent years, the

##eu – namely the green transition and digitalization – might put a positive pressure on the potential output growth. investments in green and digital technologies could boost labor productivity and foster sustainable growth. consequently, the ultimate question we policy makers must find answers to is which factors will be dominating in the near future. with such long - term developments and the current circumstances, how should we balance economic slowdown and increasing prices? to be more precise, what weight should we give to the taylor rule variables and what time dimension of projections should we focus on? there is some merit to believe that structural forces that push neutral interest rate lower such as demographics, globalization and digitalization may not fade out - globalization may be an exception to some extent as i tried to explain - and a threat of the too - low inflation may return to our agenda. in other words, if the interest rate changes affect prices in one - to - two years ’ time only, how strong should we be in reducing our monetary policy accommodation? nevertheless, this does not change the fact that in the current environment we must tighten monetary policy to keep inflation expectations from increasing to unsustainable levels. de - anchored inflation expectations would make it much more difficult for the central bank to achieve its mandate of price stability. overall, i think we should gradually raise rates to retain credibility. we must be apprehensive, that, as the neutral rate is currently much lower, we cannot increase policy rates to the levels seen 15 - 20 years ago. still, as of this moment, it is extremely important to prevent the situation in which inflation expectations become entrenched at significantly higher levels than our inflation targets over the medium term. looking at the longer horizon, at the next strategy review, it is worth discussing what monetary policy framework is mostly fit for the new issues that relate to climate change risks, retreating globalization, and returning geopolitical threats. to this end, i am grateful for this opportunity to exchange the views in this panel discussion. monetary policy