speech embargo 27 april 2018, 10. 00 am comments on monetary policy and banking regulation 110th ordinary general meeting of shareholders of the swiss national bank thomas j. jordan chairman of the governing board swiss national bank berne, 27 april 2018 © swiss national bank ( speech given in german ) page 1 / 8 mr president of the bank council dear shareholders dear guests it gives me great pleasure to welcome you to our annual general meeting. as is customary, the first part of my speech will be devoted to comments on the current economic situation and monetary policy. ten years after the start of the global financial crisis, we can now look back on a year in which economic momentum has been much more positive – both in switzerland and worldwide. the question is : has the global economy now finally completed its unusually sluggish recovery process? as i will show, there are indeed grounds for optimism, but it is still too early for this to give way to euphoria. in the second part of my speech, i would like to look at the state of play in banking regulation. a decade on from the global financial crisis, we should not just be asking whether we have recovered from the consequences of this event ; we should also take stock of what we have done to improve the ability of our banking system to withstand future crises. as i will set out, the regulatory measures put in place have clearly strengthened the resilience of our banking system, and we therefore have reasons to be optimistic in this regard as well. that said, if we are to sustainably safeguard the stability of the financial system, it is imperative that we implement in full the regulatory measures that have already been agreed. we must also continually review them to ensure they are fit for purpose. let me begin with some comments on the current economic situation and monetary policy. the economic situation and the snb ’ s monetary policy economic situation the swiss economy improved continuously last year. capacity utilisation increased and unemployment declined. real gdp in the fourth quarter of 2017 was up 1. 9 % year - on - year, while inflation also returned to positive territory last year for the first time since 2011. the improved economic situation is not only attributable to the upturn in the global economy. there have also been favourable developments on the foreign exchange markets, as the swiss franc has weakened since the second half of 2017, against the euro in particular. this has boosted the price competitiveness of export - oriented industries and provided welcome relief for

1 / 5 bis - central bankers'speeches the stickiness of inflation might require current ( high ) rates for longer than previously expected. some sectors in the financial system like commercial real estate or private credit could deteriorate. inflation is receding, and most advanced economies are forecast to reach 2 % by 2025 by the imf. the latest inflation results, e. g. for the us and the uk, point toward fewer rate cuts in 2024, and some market participants in the us even told us that they expect no rate cuts by the fed in 2024 at all. labor markets remain strong, and unemployment is historically low. especially in the us, the labor market is fueled by immigration, and migrants are integrated into the labor market quickly. international trade shows signs of recovering but is still far from prepandemic levels. risks are tilted to the downside, especially if disruptions in the red sea escalate. however, some countries already face high fiscal deficits in parallel with high debt. in addition, 2024 is an important electoral year : 64 countries in the world elect their government. thus, fiscal expenditure might go up and the results of elections, especially in the us, might alter geopolitics, trade and capital flows. besides the near - term challenges already discussed, other longer - term structural challenges remain : weak productivity : total factor productivity is low, as well as innovation efforts. population aging, especially in advanced economies. this puts pressure on the pension and healthcare system, reduces the workforce as well as innovation. geopolitical fragmentation and conflicts, and their effect on movement of trade and capital. these deliberations bring me directly to the first main topic which i want to discuss today : 2. inflation and the normalization of monetary policy as you all probably know, the eurosystem increased interest rates 10 times to 450 basis points in the last two years to fight exceptionally high inflation. the eurosystem's latest inflation number is 2. 4 % ( eurostat flash estimate for march ) and a recent ecb forecast assumes inflation rates of 2. 0 % and 1. 9 % for 2025 / 26. so, we are approaching our target of 2 %. many financial market participants currently anticipate a first key interest rate cut in june. however, let me reiterate that the ecb will continue to follow a data - dependent and meeting - by - meeting approach to determining the appropriate level and duration of restriction.