jean - pierre roth : snb commemorative publication “ the swiss national bank 1907 - 2007 ” remarks by mr jean - pierre roth, chairman of the governing board of the swiss national bank and chairman of the board of directors of the bank for international settlements, at the launch of the commemorative publication “ the swiss national bank 1907 – 2007 ”, zurich, 21 june 2007. * * * ladies and gentlemen it is with pleasure and some pride that i present our commemorative publication today or – as the german language puts it so well – our festschrift, or celebratory work. there is indeed good reason to celebrate. one hundred years of doing business, crowned for the most part with success, certainly warrants celebration. the publication of a festschrift is one of the events being held to mark this anniversary. it is the fourth such work to be published, following on from those of 1932, 1957 and 1982. it is somewhat different, however, insofar as it commemorates an entire century of the national bank ’ s existence. we wanted this commemorative publication to be a learned work, which at the same time is accessible to a very broad readership. we wanted it to be both unpretentious and modern, yet in keeping with the tradition of the previous works. i make no secret of the fact that significant resources were deployed to prepare the book. work first started over three years ago and some fifty or so bank employees were involved in the project. the work which i am presenting to you today is divided into three sections. the first tells the history of the snb over the first seventy - five years of its existence. as the previous commemorative publications have already dealt in detail with this period, it was no longer necessary to recount all the events again. we thought that it would be more interesting to take a fresh and critical look at certain episodes from a historical perspective. this is why we called upon the services of three distinguished economists and historians, asking them to explore this period, and leaving them free to choose the salient points of their analysis. michael bordo of rutgers university and harold james of princeton university took a detailed look into the first half - century of the snb, in other words, from its jean - pierre roth snb founding in 1907 to the end of the second world war. an exciting yet troubled time, which included the surge in inflation that came in the aftermath of the first world war, the laborious return to the gold standard, the 1936

a brief recap of the three elements of our strategy and explain the impact this adjustment will have. the first element is our definition of price stability. the snb equates price stability with a rise in the swiss consumer price index of less than 2 % per annum. price stability is to be ensured over the medium term. this primary goal of our monetary policy remains unchanged. the second element is our conditional inflation forecast. this is drawn up quarterly, with each forecast having a horizon of three years. the inflation forecast gives us an indication as to whether our current monetary policy stance is appropriate for keeping future inflation within the range consistent with price stability. it is our compass, so to speak, showing us whether we are heading in the right direction. it plays another important role in that it gives the public an indication with regard to the need for monetary policy adjustments going forward. the inflation forecast is based on the assumption that a given interest rate remains unchanged over the entire forecast horizon. to date this has been the three - month libor, and from now on it will be the snb policy rate. this brings me to the third element of our monetary policy strategy. this determines how we communicate the level of money market rates we seek to maintain. to date, we have used the target range for the three - month libor for this purpose. we will now do so by setting the snb policy rate. in implementing our monetary policy, we will ensure that the secured short - term money market rates are close to the snb policy rate. in this regard, we are focusing on saron, the most representative of the short - term swiss franc rates. saron is an overnight rate. given that we are now focusing on an overnight rate rather than a three - month rate, there is no further need for a target range. this was previously necessary because expectations regarding future monetary policy could strongly influence the three - month rate. the snb policy rate also sets the terms for monetary policy - related transactions with the snb. the conditions on the money market are currently determined by the interest rate banks pay on their sight deposits at the snb. we have decided that the interest on these deposits will at present correspond to the snb policy rate, and will thus remain at −0. 75 %. i will now summarise the importance of the snb policy rate. from this point onwards, we will use the snb policy rate in taking and communicating our interest rate decisions.