to restore the equilibrium between supply and demand for capital. monetary policy amid low interest rates what does the lower level of interest rates worldwide mean when it comes to conventional monetary policy? if interest rates are already low, monetary policy is less able to respond to shocks. if the economy and inflation weaken, a central bank will normally stimulate economic activity by lowering interest rates. this mitigates the slowdown and stabilises prices. if interest rates are already low, however, a central bank only has a few moves at its disposal before rates reach zero. and once that happens, conventional monetary policy ends. the restrictions on the latitude of conventional monetary policy are even more pronounced in the case of switzerland. indeed, our country has traditionally been known for its political and economic stability, and the swiss franc is thus viewed by investors as being particularly safe. in return for this security, they are prepared to hold investments in swiss francs at lower rates of interest than they would in other currencies. this has in the past led to interest rates in switzerland generally being lower than in other countries. therefore if monetary policy page 3 / 8 needed to be eased, the starting point for interest rate cuts was correspondingly lower here than elsewhere. monetary policy reaction to the major economic crisis ladies and gentlemen, the global financial and economic crisis broke out eleven years ago, and was followed by a marked decline in economic output and inflation. at that time, the snb had to switch to an expansionary monetary policy stance in order to fulfil its mandate. we initially responded with conventional measures, and quickly lowered interest rates to virtually zero. the global financial crisis was swiftly followed by the sovereign debt crisis in the euro area. the attendant uncertainty on the financial markets bolstered demand for the swiss franc as a safe haven, thus putting appreciation pressure on our currency. to counter these upward forces, we had no option but to resort to unconventional means. we intervened on the foreign exchange market, and in september 2011 introduced a minimum exchange rate against the euro. from mid - 2014 onwards, the international monetary policy environment began to change. on the one hand there were increasingly clearer signs that the us was about to adopt a tightening stance, whereas in the euro area a loosening of monetary policy was becoming more and more likely. the euro subsequently depreciated markedly against the major currencies. as a result, by the beginning of 2015 the minimum exchange rate was no longer sustainable. to retain control over our monetary

funds, life insurers and banks? the marked weakening in the economy would cast a pall over the earnings prospects of swiss companies, and swiss equities would come under pressure. although short - term interest rates in switzerland would no longer be negative, there would be little change in capital market interest rates owing to the deterioration in the economic outlook. all in all, the level of interest rates would thus remain low, and so too would the yields on long - term swiss franc bonds. ultimately, there would be scarcely any significant improvement for savers, pension funds, life insurers and banks. the same goes for the real estate market. although its momentum would be curbed somewhat if we were to cease charging negative interest, there would be little change in the low level of interest rates and the impact would therefore be limited. in the current situation, the risks to financial stability must be addressed with focused macroprudential measures. this will then curb demand for mortgages and real estate and strengthen banks ’ resilience. ladies and gentlemen, abandoning the negative interest rate in the current environment would weigh heavily on the swiss economy. this would not help either savers or pension funds, nor would it be beneficial for financial stability. in other words, as things stand at present, removing the negative interest rate would not be in the interests of our country as a whole. focusing on the big picture we introduced the negative interest rate after careful consideration of the advantages and disadvantages. we continually assess its effectiveness, and objectively analyse the costs and benefits. global economic activity has weakened in recent months. although gdp growth is likely to pick up again somewhat after stagnating in the second half of 2018, the inflation outlook for this year and next is subdued. in addition to this, given the economic and political uncertainty in many countries, the situation on the financial and foreign exchange markets remains fragile. page 6 / 8 against the current backdrop, our unconventional monetary policy with the negative interest rate and our willingness to intervene in the foreign exchange market as necessary remains both essential and appropriate. and this is in part also because it does not attach greater weight to any individual issues over others, and is instead at all times focused on the interests of switzerland as a whole. the negative interest rate has its place among the instruments at the snb ’ s disposal, which include conventional and unconventional measures alike. it is incumbent on us to use the instruments best suited to tackling the situation at hand