may 2012. bis central bankers ’ speeches economic situation that is deemed “ unsatisfactory ”. this could result in central banks being perceived as all - powerful, though such expectations are far from realistic. troubled financial markets and dangerous economic circumstances required the implementation of exceptional measures. even if these measures have a welcome impact in the short term, central banks must remain focused on their core mission, which is to ensure price stability. this is their long - run contribution to economic well - being. monetary policy does not create wealth in and of itself. it is the innovative and entrepreneurial strengths of the private sector, not short - term monetary policy measures, that are the engines of real sustainable growth. could the short - term liquidity - creating measures pose a risk for price stability? this risk is often alluded to, and central banks are acutely aware that any measures must be rigorously and repeatedly assessed to prevent any mid - term resurgence of inflation. in any case, there are well - identified means of quickly reversing the effects of an abundance of liquidity, though it is true that the timing of such “ exit ” measures is a matter of delicate monetary policy assessment. today, however, abundant liquidity and extended periods of low interest rates are recognised as posing a risk to financial stability. one of the lessons of the recent crisis is that price stability is not sufficient for financial stability. many central banks are therefore placing greater weight on financial stability concerns in their decision - making processes. to this end, several now envisage the use of specific new ( “ macroprudential ” ) instruments to directly address the risks to financial stability. it is also worth considering whether central banks ’ recent activism could undermine their independence. several critics claim that, by implementing measures such as quantitative and credit easing, central banks have, at times, adopted “ quasi - fiscal ” policies and that the boundaries between fiscal and monetary policy were, thus, blurred. yet, central bank independence is a delicate democratic concept. its objective is to prevent temporal inconsistencies in the policies pursued from leading to results that could harm the economy as a whole. in other words, independence enables central banks to focus on price stability in the long - term interests of a country, as opposed to prioritising the short - term demands of specific political or economic interest groups. at present, the use of unconventional measures is largely motivated by the fact that monetary policy is at the zero lower bound and fiscal policy options are very

##makers are seen as more credible may be the easiest way to anchor inflation expectations. luckily, the snb enjoys high credibility at home and abroad. average inflation over the last 20 years amounted to 1. 8 %, and the bank proved on many occasions that it was ready to act in order to defend price stability even in difficult situations. moreover, the snb was granted formal independence in 2000 through a constitutional amendment. such independence is commonly seen as a means of enhancing the credibility of a central bank, since it limits the influence of the government, which may have an interest in keeping interest rates low, and thus stoking inflation. in my view, however, the formal independence we got in 2000 is unlikely to have changed the public's perception of the snb much, as the bank enjoyed de facto independence already before that date. of course, our credibility rests on a commitment to price stability that is not just our own, but one that is also shared by the government and the population at large. an important determinant of a central bank's credibility is its operational independence. successful monetary policy is based on thorough economic analysis and professional implementation. to achieve quality and continuity in this area, a central bank must be able to attract and retain staff versed in monetary economics, market operations and many other fields. only if a central bank's finances are insulated from daily politics, can it compete freely with the private sector in the access to human resources. transparency a second condition for successful monetary independence is a well - communicated monetary policy strategy. policymakers need to announce clearly what they are trying to achieve in both the long and the short term, and with what means. transparency of this kind makes it easier for market participants to judge the likely course of future monetary action. as a consequence, monetary policy changes rarely cause major fluctuations in financial markets, and the central bank can set interest rates to achieve the goal of price stability without having to fear financial distress. the snb attaches great weight to communication. our monetary policy goal is clearly spelt out in the national bank act and in our monetary policy concept. our interest rate decisions are communicated together with an explanation that includes our inflation forecast, which is based on the assumption that interest rates remain constant. this allows the market to understand how we judge future developments in the absence of monetary policy changes and thus makes it possible to infer the likely direction of future interest rate adjustments. in between monetary policy decisions, my two colleagues in the