require. to explain the rationale behind the snb ’ s current monetary policy in more detail, let me briefly outline our assessment of the global economic situation, as well as the risks for the swiss economy. subdued global economic outlook and substantial downside risks in our global baseline scenario, the outlook remains – overall – subdued. economic growth will continue to be driven by emerging markets. however, we expect growth rates in china and india – the most important countries in emerging asia in economic terms – to remain below potential in the near term, due to prior monetary policy tightening, high inflation, and sluggish external demand. looking at the us, recent data suggest that the situation has improved slightly. however, this should not hide the fact that economic growth in the us is likely to remain sluggish. as you may know, unemployment is still high and the fiscal environment remains contractionary. for the euro area – switzerland ’ s most important trading partner by far – the economic outlook has deteriorated since last autumn. uncertainty bis central bankers ’ speeches about an escalation of the sovereign debt crisis is undiminished. as a result, the euro area is likely to face a mild recession in early 2012. this short overview shows quite plainly : we still live in a world with substantial downside risks. thus, the global economic situation might turn out to be worse than described above. one possible risk is a more pronounced slowdown in emerging market growth. this would reinforce the downturn in european countries. another risk is that fiscal consolidation in the us may exert a greater drag on growth than projected today. but the main risk is – without doubt – a further escalation of the european debt crisis. were such a risk to materialize, the consequences for the international financial and banking system – and in turn for global activity – would be severe. swiss economic outlook what does the economic outlook for switzerland look like, given a baseline scenario with a world economy on a weak growth path as described above? after two years of fairly robust recovery, we expect the swiss economy to slow considerably in 2012. the situation remains very challenging for switzerland. on the one hand, the still very strong swiss franc is weighing on export performance. firms are suffering from compressed margins. if the difficult exchange rate situation persists, companies may consider relocating production capacity to other regions. on the other hand, the slowdown in external demand, as expected in our global baseline scenario, will likely weigh on investment spending and labor demand

thomas jordan : real estate, mortgages and monetary policy speech by mr thomas jordan, member of the governing board of the swiss national bank, at the iazi, schweizer immobilienkongress 2009, zurich, 10 november 2009. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * there is a close interrelationship between real estate, mortgages and monetary policy. on the one hand, monetary policy impacts on the real estate and mortgage market. when the central bank reduces interest rates, this eases the burden on household and company budgets and fosters the demand for real estate. on the other hand, monetary policy also takes account of developments on the real estate market because these can affect economic growth, inflation and financial stability. once again, the current financial crisis has thrown these interrelationships into sharp relief. problems in a number of mortgage and real estate markets – in particular in the us and the uk – triggered the financial crisis and plunged the global financial system into a systemic crisis. this impacted on switzerland ’ s financial stability and made it necessary to create the stabilisationfund for the transfer of illiquid ubs assets. the swiss real estate and mortgage market played a positive role in various measures adopted by the snb to handle the financial crisis. swiss mortgages played a role in securing swiss financial stability in the limmat pfandbrief transactions, whereby big banks improved their refinancing situation by issuing covered bonds. consequently, switzerland – unlike other countries – was able to avoid introducing state - guaranteed bonds. with the drastic reduction in key rates and the subsequent decline in mortgage rates, the burden on households and companies was eased. in this way, the severity of the recession was somewhat alleviated and the risks of deflation reduced. however, the interest rate is now at a historic low and this means medium - term risks for the swiss real estate market and financial stability. experience shows that periods of low interest rates provide scope for excesses on the mortgage and real estate market. consequently, in the current environment in particular, attention should be given to ensuring that past mistakes are not repeated. caution must remain the watchword when granting loans.