. ” i can assure you that we have moved on a bit from those days. with this uncertain outlook and a volatile environment, communication becomes essential, and much has been said recently about central bank communications. the national bureau of economic research4 highlighted the increasing importance of communication as a powerful tool that has the ability to move financial markets, enhance the predictability of monetary policy decisions and help achieve central banks macroeconomic objectives. this is because central bank communications influence short - term interest rates which in turn influence long - term interest rates and other asset prices which affect macroeconomic variables such as inflation and output. having said that, it is also true that poorly executed communications can do more harm than good and in these instances sometimes “ less is more ”. janet yellen5 made reference to a growing body of research and experience around the topic of communication which demonstrates that clear communication is itself a vital tool for increasing the efficacy and reliability of monetary policy. she pointed out that the challenges capital flows to emerging market economies, june 26, 2013. central bank communication and monetary policy : a survey of theory and evidence, april 2008. communication in monetary policy, april 4, 2013. bis central bankers ’ speeches facing the us economy in the wake of the financial crisis have made clear communication more important than ever before. often, comparisons are made between the 1994 fed rate hiking cycle and that of 2004 and many have contemplated whether we could be headed for a repeat of 1994. in 1994 the fed hiked interest rates from 3 per cent to 6 per cent in the space of 12 months. there was significant spillover effects on global financial markets in particular as they related to a sharp decline in portfolio inflows into latin america and the mexican crisis ensued. in contrast, the fed ’ s exit in 2004 had a much more muted impact on global markets. nonetheless, markets reacted quite differently in the two episodes …. what was the difference? the 1994 exit was unanticipated while the 2004 exit was anticipated. expectations created and communication provided played a big role in how markets reacted. suffice to say, of course, preparing the market and clear communication does not in and of its own ensure a smooth transition, but it can certainly help limit volatility and uncertainty. this time around, the task at hand is made even more complicated by the fact that monetary accommodation provided is much more than was provided in the past and much more creative than in previous episodes. it is clear that consistent and clear communication will be

philipp m hildebrand : monetary policy situation and economic prospects summary of a speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at the centre for banking studies, lugano, 28 september 2004. the complete speech can be found in french on the swiss national bank ’ s website ( www. snb. ch ). * * * in formulating its medium - term monetary policy, the swiss national bank ( snb ) must take the uncertainty surrounding the development of the economic environment into consideration. the snb believes that the economy is well on the road to recovery, both in switzerland and abroad. for our country, it anticipates real gdp growth of close to 2 % in 2004. sustained growth is also expected for the coming years. consequently, the utilisation of the economy ’ s production capacity will steadily improve, while unemployment will gradually decline. the improved utilisation rate will be accompanied by a rise in inflationary pressure in the medium term. this scenario could be revised, however, if new information were to come to light. the snb will thus continue to monitor economic developments closely and will subsequently draw the necessary monetary policy conclusions.