##way over the last three quarters. however, the period of near - stagnation which the us economy is currently experiencing is not likely to be too prolonged. the resolutely expansionist nature of us monetary and fiscal policy, combined with a weak us dollar that favours exports, should help to reenergise the us economy. a recovery is expected towards the end of the year, albeit a tentative one, given that the deterioration in the employment outlook, the erosion of purchasing power and the fall in property prices look set to weigh on consumer sentiment and income. europe represents the second pole in the global economy. although the continent enjoyed strong growth during the first quarter of 2008, the remainder of the year should see a slowdown. a number of factors will contribute to this loss of momentum. first, the strong euro and the sharp downturn in the us economy are dampening exports. the sub - prime crisis has led to a tightening of credit conditions, while consumer confidence has deteriorated. this will have a knock - on effect on consumer spending. however, the slowdown in europe will be much less pronounced than in the us, although the subsequent pick - up in economic activity will also probably be gradual. the asian economies, which constitute the third major hub, continue to exhibit strong growth as a whole, since they remain virtually unaffected by the slowdown in the us economy. nevertheless, they have been hit by rising commodity and food prices, which are seriously reducing incomes. regional variations aside, it would therefore be reasonable to conclude that the global economy, as a whole, is not witnessing a significant slowdown at present – as opposed to one of the rather more alarming scenarios that were only recently being mooted. the impact of the crisis in the financial sector on the rest of the economy has been felt less acutely and a lot more slowly than could have been expected. it is precisely the continued robust global growth which is the main reason for the sharp rise in food and oil prices – although market speculation may have accentuated this trend. in most countries, the rise in the price of oil has translated into an increase in consumer prices. after remaining at a moderate level for a long time, inflation is again a cause for concern. this increase in the indices risks destabilising inflation expectations, which have remained very stable over the last number of years. swiss economic outlook last year saw the swiss economy still operating at a dynamic pace, but there was a distinct fall - off during

terms of swiss francs, but only 13 % in terms of us dollars. in the longer term, the weakening in the swiss franc is indirectly contributing to the increase in prices by stimulating demand. second, real short - term interest rates have dropped. there has been a rise in expected inflation for the near future and this means – for given nominal interest rates – lower real expected yields for short maturities. an analysis of monetary conditions in terms of volumes leads to similar conclusions. let us begin with money, which is the best indicator to use if a broad - brush and long - term outlook for the economy and inflation is required. the m1 and m2 monetary aggregates, which were declining until not long ago, have been practically stable for some months. as for m3, it is continuing to exhibit moderate growth. the sub - prime crisis has confirmed the importance of mortgage loans as an indicator of the degree of relaxation of monetary policy. the reason for this is simple. because construction projects are long - term in nature, real estate investment reacts particularly sensitively to interest rates. consequently, mortgage loans were growing at a rate of 5 – 6 % in 2003 and 2004, when our monetary policy was firmly expansionary. these growth rates then declined gradually as we tightened our monetary policy in 2006 and 2007. last april, they settled at around 3. 3 %. the growth rate of other loans – a particularly heterogeneous category – remains high, confirming that the underlying trend in the economy remains dynamic. in december, we emphasised the need to give particular attention to conditions in the credit market in the light of the sub - prime crisis. in order to do this, the snb conducted a survey of 20 banks in march, in which they provided us with information on their intentions and expectations. this survey completed the analysis of credit volumes. it reveals, first, that banks have not significantly tightened lending conditions with respect to either households or companies over the course of the last few months. second, the banks state that, in broad terms, demand for credit has remained unchanged. third, they do not expect any significant change in either supply or demand in the months ahead. thus this survey confirms the conclusions of the analysis of credit volumes which, as we have seen, are continuing to rise. unlike similar surveys conducted in the us and the euro area, it shows that, for the time being, the sub - prime crisis has not led to a deterioration in credit conditions in switzerland. inflation and inflation risks