news conference 15 december 2022, 10. 00 am introductory remarks by martin schlegel i am pleased to give you an assessment of current developments with regard to cash. since june, after many years of strong growth, we have seen a significant decline in banknote circulation. to contextualise this decline of approximately 10 %, let me first say a few words about the above - average growth in recent years. in the period since the 2008 financial crisis, the value of banknotes in circulation grew, on average, more than twice as fast as in the two preceding decades – by around 6 % instead of 2. 5 % per year ( cf. chart 1 ). between mid - 2008 and june 2022, the value of banknotes in circulation more than doubled overall, from around chf 41 billion to chf 91 billion. this sharp increase was driven in particular by the desire of companies and private individuals to hold cash as a store of value. there was particularly strong demand for the large denominations, such as the 1000 - franc and 200 - franc notes ( cf. chart 2 ). we see two reasons for the increased demand for cash as a store of value over the last 15 years or so. first, there were multiple periods of high uncertainty, notably the financial crisis and the coronavirus pandemic. cash tends to be popular as a secure store of value during such times. second, the general decline in interest rates – and negative interest rates in particular – also contributed to the increased demand for cash. when interest rates are low or negative, it is relatively attractive to hold cash ( as opposed to bank deposits, for example ) as a store of value. the increase in interest rates since june has meant that there is once again less of an incentive to hold cash. against this backdrop, the value of banknotes in circulation fell by around chf 10 billion to chf 81 billion between june and october. returns of the 1000 - franc notes in particular were substantial, totalling chf 7. 7 billion. we expect this decline to continue. nevertheless, demand for cash as a store of value is likely to persist. companies and households consider such a safety net to be important. page 1 / 2 berne, 15 december 2022 martin schlegel news conference of course, cash is not only used to store value, but also to make payments. small denominations in particular play an important role here. the decline in banknotes in circulation observed since

the moment essentially focused on larger firms with smaller ones probably suffering from restricted access to credit, in the swiss case, any diverging trend between big and small firms is not of major importance. rather, the difference is more accentuated for firms that are predominantly export - oriented as opposed to those oriented towards the internal market. on the export side, the ability of swiss exporters to continue redirecting their efforts towards the more dynamic regions of the world economy, in particular emerging asia may be a crucial test. this region is leading the world in terms of economic recovery from the crisis. it is clear here that the proponents of a reasonable version of the decoupling hypothesis are on the winning side of the intellectual debate. on a global level, inflation pressures are expected to remain subdued in most economies. in advanced economies, headline inflation is expected to pick up from near neutral levels in 2009, but remain low in 2010. for switzerland, the path of inflation in the short term will be largely dictated by recent movements in oil prices and associated base effects. inflation will nevertheless remain positive throughout 2010. this follows a negative rate of 0. 5 % in 2009. assuming that monetary policy remains unchanged, the snb ’ s forecast show that inflation will reach 0. 7 % this year. the snb ’ s forecasts also show that inflation will begin to increase again from the beginning of 2011, to reach 2 % in the first half of 2012. iii. policy challenges for the future 1. exit strategies for the snb, the return to normality does not pose any difficult conceptual problem. the unconventional measures developed to combat the current crisis have in part modified the nature of the liquidity created. liquidity resulting from repos and currency swaps is temporary : it flows back automatically when transactions are not renewed. liquidity created by acquiring foreign exchange and swiss franc bonds is more permanent. the issuance of snb bills routinely practiced since october 2008 has given the snb a tool that can play a central role in liquidity absorption. the next speaker, my colleague dewet moser, will concentrate on the more technical aspects of the exit strategy. suffice it to say that the toolbox is available. it is not a question of how, only of when. on the timing issue, because of the long and variable lags between monetary policy decisions and their impact on inflation, the decision to start tightening is a difficult one. it is necessary to balance the risk of moving too soon