secured short - term money market rates, of which saron is the most important, are close to the snb policy rate. by contrast, we use the term ‘ transmission ’ to describe the pass - through of the policy rate to other relevant market interest rates and, ultimately, to economic activity and inflation. the implementation of our monetary policy involves various instruments, including the remuneration of banks ’ sight deposits at the snb and the conduct of open market operations, such as repo transactions and the issuance of snb bills. these are the key instruments that the snb uses to implement its interest rate policy. the monetary policy stance is then transmitted to many market interest rates. the relatively moderate rate of inflation compared with our main trading partners ensured that swiss exporters remained internationally competitive, despite the nominal appreciation of the swiss franc. the real appreciation of the swiss franc – taking into account these inflation differentials – was much less pronounced. swiss average rate overnight. conditions in equity and corporate bond markets account for the remaining weights. page 4 / 9 the snb implements its interest rate policy in the secured short - term swiss franc money market the snb implements its interest rate policy by steering secured short - term swiss franc money market rates. it is important to note that the snb ’ s policy rate is not a market interest rate, but a means of communicating its monetary policy stance. in order to influence monetary conditions in switzerland, the snb sets the policy rate at the desired level and steers secured short - term money market rates close to the snb policy rate through tiered remuneration of sight deposits and liquidity - absorbing operations. saron is the most important secured short - term swiss franc money market rate. 9 during the recent tightening cycle, the snb raised its policy rate by a total of 2. 5 percentage points from – 0. 75 % to + 1. 75 %. chart 7 shows the policy rate ( blue line ) and saron ( red line ). as you can see, each increase in the policy rate was fully passed through to saron. the snb ’ s implementation framework helps to closely align all short - term swiss franc money market interest rates. some of these rates, such as unsecured short - term money market rates and implied rates from currency swaps, affect the funding costs of financial institutions, which in turn influence the pricing of financial products. most of the time, arbitrage ensures

implementation, a strong and broad transmission of the snb ’ s interest rate policy is crucial for ensuring appropriate monetary conditions. while some financial products, such as variable - rate mortgages, are priced directly on the basis of saron, the saron - based swap curve also plays an important role in facilitating a broad transmission. this is because most financial products, such as swiss franc - denominated mortgages, loans and bonds, are priced using the saron - based swap curve. thus, saron is not only the most important directly used reference rate in switzerland, but it also serves as an anchor for the swap curve and is therefore also relevant for other swiss franc interest rates. 10 adjustments to the snb ’ s interest rate policy are transmitted to the saron swap curve. while the snb directly controls saron, the short end of the swap curve, it also influences longer - term rates by shaping expectations, for example via the publication of its quarterly conditional inflation forecast. 11 chart 9 illustrates this by showing the saron swap curve at three different points in time. in may 2022, just before the first increase in the snb policy rate, the swap curve was upward sloping, as expectations of higher future interest rates were priced in at the longer end of the curve ( blue line ). a year later, the swap curve was almost flat, as short - term rates had risen significantly more than longer - term rates ( red line ). this picture was consistent with market participants ’ expectations that no further rate hikes were needed to prevent inflation from rising. today, the swap curve is inverted, which is consistent with market participants ’ expectations of moderate inflation and further cuts in the snb policy rate in the near future ( yellow line ). adjustments to the snb ’ s interest rate policy are also transmitted to other segments of the financial market. for transmission to be effective, the snb policy rate must influence not only interest rate swaps, but also all other relevant financial market segments. chart 10 shows the path of several 10 - year interest rates from 2021 onwards. as you can see, the interest rates on mortgages ( red line ), one of the main financial products offered by banks, have closely tracked swap rates since the beginning of 2022 ( blue line ). 12 yields on other financial market products, such as corporate bonds ( green line ) and covered bonds ( yellow for a broader discussion of how saron replaced libor as the main swiss fran