capacity utilisation should stimulate equipment investment. demand for labour is likely to firm further. for 2011, the snb is maintaining its forecast of real gdp growth amounting to around 2 %. monetary and financial conditions monetary conditions were again characterised by the divergence between low interest rates and the swiss franc, which appreciated significantly in the second quarter. since the last monetary policy assessment, the three - month libor has persisted in the lower part of the target range. with inflation expectations rising slightly, real interest rates have remained low and even, in the short - term range, negative. in general, although long - term interest rates have risen since their low point in august 2010, they are still at a low level. by contrast, the real export - weighted swiss franc appreciated further in the second quarter and has reached an all - time high. by the beginning of may, the us dollar – mainly – had weakened significantly against the swiss franc. thereafter, renewed concerns about stability in the euro area also led to a depreciation of the euro. my colleague, jean - pierre danthine, will speak about the situation on the international financial markets in more detail later on. the snb is concerned about exchange rate developments. the snb forecasts are based on the premise that the exchange rate developments will stabilise in the medium term. should the exchange rate again be subject to significant changes, a reassessment of the inflation outlook would be required. since the last monetary policy assessment, the m2 and m3 aggregates have been growing at about 7 % year - on - year. some of this high growth rate is attributable to the current low interest rates. overall, ample liquidity is available in the economy and this means potential risks for price stability in the long term. mortgage lending has also continued to increase substantially, growing at a rate of 4. 7 % in april. in an environment of low interest rates and substantial advances in real estate prices, a high rate of growth in mortgages can harbour risks for financial stability. in the speech that follows, my colleague thomas jordan will outline for you the snb ’ s financial stability report. in view of the potential risks for the financial sector, the snb continues to closely observe the situation on the mortgage and real estate markets. bis central bankers ’ speeches chart of conditional inflation forecast the ( dashed ) red curve on the chart represents the new conditional inflation forecast. it shows the future path of inflation,

jean - pierre roth : review of the swiss economy in 2008 and the outlook for 2009 speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the general meeting of shareholders of the swiss national bank, berne, 17 april 2009. * * * mr president of the bank council dear shareholders dear guests the financial crisis, which first emerged in august 2007, continued to spread during 2008. from mid - september on, the situation deteriorated sharply. growing uncertainty about the stability of the financial system gradually paralysed the money market. most industrialised countries implemented relief packages for banks with the aim of improving their refinancing conditions, cleaning up their balance sheets or strengthening their capital base. in fact, the crisis led to an unprecedented level of government intervention. far - reaching guarantees were granted, major corporations were put under state control, and a substantial amount of risk was transferred from the private to the public sector. the difficulty of implementing our monetary policy the waning ability of the financial markets to function properly posed problems for the implementation of our monetary policy. the prevalent mood of uncertainty created a strong appetite for liquidity, and yet the seizing - up of the interbank market hampered the supply in swiss francs. in view of these two factors, the swiss national bank ( snb ) had to resort to some exceptional measures. from the start, the uncertainty engendered by the financial crisis led to a surge in demand for liquidity by both banks and the public in switzerland. the distrust characterising interbank relations encouraged certain institutions to stockpile capital. this trend was reinforced by the fact that numerous banks were unable to make a reliable estimate of their own liquidity requirements, particularly in view of the soaring demand for cash on the part of the public. at the end of last year, the total value of banknotes in circulation had risen by 11 % and banks had three times as much money on their snb sight deposit accounts as at the end of 2007. to satisfy this extraordinary demand, the snb was obliged to expand its repo operations in terms of volume and maturity, and to inject liquidity into the market through a new channel – that of swap transactions. over the past few years, repos have become the standard tool with which we implement our monetary policy. they involve loans to banks denominated in swiss francs and backed by securities. as a rule, these loans are granted for a term of one week. however, in response to