adjustment would be to target an average inflation rate over a given period. overshooting and undershooting inflation rates would have to be compensated for over time. this could better stabilise longer - term inflation expectations in that the aim would be a steady development in the level of prices. why do we not compensate for past deviations from price stability? the swiss economy has proven in the past that it can deal well with temporary inflation shocks, and that longer - term inflation expectations are well anchored. compensating for past deviations from a targeted average value would only be possible with massive additional volatility in prices and output, especially given the strong global shocks to which switzerland is exposed. such an approach would also find little acceptance among the general public. the third possible adjustment relates to the choice of a point target instead of a range when defining price stability. this could help anchor inflation expectations more precisely and thus better stabilise inflation. why do we refrain from adopting a point target? having such a precise goal would unnecessarily complicate monetary policy implementation for the snb. our definition of price stability as a range enables us to continually weigh up the costs and benefits of our monetary policy measures. doing so allows us to vary our inflation tolerance within the range consistent with price stability in line with the situation at hand. we can thus let inflation persist at the upper or lower end of this range for a longer period, without losing credibility. in particular, this allows us to better absorb different global inflation regimes. for example, we can live with inflation in the lower part of our price stability range over a longer period in an environment of increasing globalisation. likewise, in an environment of shrinking global supply, we can accept inflation in the upper part of the range. added to this, our medium - term focus allows us to be flexible in reacting to larger surges in inflation or deflation, and to take the costs of restoring price stability into consideration. the page 8 / 16 developments in recent years show that a 2 % point target for inflation in switzerland would have required significantly stronger monetary policy easing measures. this would not have been proportionate from a cost - benefit perspective. our definition of price stability is thus also a sign of pragmatism and realism. a certain tolerance of inflation rate fluctuations is necessary, especially for a small open economy like switzerland that is constantly exposed to disruptions from abroad. our experience shows that it is virtually impossible to fine - tune inflation

bank of france reports industrial output generally stabilized in may 1997 bank of france, monthly business survey, 17 / 06 / 97. according to business leaders surveyed by the banque de france, industrial output generally stabilized in may, following a sharp upturn in april. the automobile sector was the only one to register a decline, which was accentuated by calendar effects. the capacity utilization rate fell back slightly from one month to the next. overall demand changed little. on the domestic market, inter - industry demand was less buoyant than in april, whereas foreign demand, boosted by the strength of the dollar and the pound sterling, remained firm. orders continued to stream in from english - speaking, asian and east european markets. order books were considered to be at normal levels across the different sectors, and they appeared on the full side in the business equipment sector. inventories, which fell back, now seem to be at the desired level. over the coming months, industrial output is likely to advance appreciably in all sectors. the best performances are expected from the food - processing industry and the capital and intermediate goods sectors. commodity prices edged up, notably in the food - processing and capital goods sectors. these increases were only partially passed on to finished product prices, which rose only in the food processing industry, while remaining unchanged for consumer and intermediate goods and dipping in the capital goods and automobile sectors. the installation of new equipment, which was judged necessary at the beginning of the year, is taking place only very gradually, in particular at small and medium - sized companies. retail activity perked up considerably in may. employment levels in industry showed little change, except for the automobile industry where cutbacks continued. they fell slightly in the building sector, whilst holding steady in the retail and market services sectors. permanent staff levels showed no significant change, although certain companies - primarily those engaged in seasonal activities as in the food - processing industry - made increased use of temporary staff.