implementation of workable recovery and resolution plans, and the introduction of binding total loss absorbency capacity ( tlac ) requirements. bis central bankers ’ speeches uncertainties regarding optimal regulation are likely more important here than in the case of the real estate and mortgage markets, as the probability of a big bank failing and the macroeconomic cost of such a tail - risk event may be less clear or not “ objectively ” measurable ex ante. such fundamental uncertainties imply more substantial tensions with respect to the choice and design – size and scope – of further measures to contain the tbtf issue. going too far could theoretically entail a cost to society that may not be warranted from a cost - benefit perspective. not going far enough, however, creates the risk of ending up in a very costly crisis. let me conclude : sustainably improving the stability of the financial system is a difficult task. but it ’ s not an impossible dream. it is a fact that improving the regulatory framework entails a delicate trade - off between knowledge and prudence. there will always be risks about which knowledge will be lacking ; even worse, there may be risks we don ’ t know about ex ante. this speaks for the willingness, collectively, to accept the price of precaution. however, it is also a fact that we will be able to make tangible progress towards a sustainably more stable financial system only if this view is widely shared in society! the last couple of years of work in switzerland leads me to be cautiously optimistic. but this must not be misread as a reason to be complacent or give up midway. references group of experts on the further development of the financial market strategy ( 2014 ). final report. www. news. admin. ch / nsbsubscriber / message / attachments / 37610. pdf federal constitution, article 99. www. snb. ch / en / mmr / reference / bundesverfassung _ art _ 99 / source fsb ( 2014 ) : global shadow banking monitoring report 2014. www. financialstabilityboard. org / 2014 / 11 / global - shadow - banking - monitoring - report - 2014 / message concerning the revision of the national bank act ( in german ). www. snb. ch / de / mmr / reference / snb _ legal _ docum _ brbotschaft / source national bank act. www. admin. ch / opc / en

not seen for 15 years. this was a matter for concern, as there was a risk that such a level would alter households ’ inflation expectations, potentially leading to a sharp rise in nominal wages at year - end and resulting in a certain stickiness of inflation. however, these two elements behind the recent rise in inflation have since reversed. first, oil prices collapsed, falling below the usd 50 mark in mid - november after peaking at usd 145 in early july. the plummeting oil price can be explained both by a drop in global demand as a result of the economic slowdown we have just described, and by the unwinding of speculative positions. second, the swiss economy will soon be operating below potential, and we will see a renewed rise in unemployment. this situation will have a moderating effect on both price and wage - setting behaviour. thus, we are now forecasting – as the graph presentation will show in just a moment – that inflation will decline almost continuously throughout 2009. despite the interest rate cuts made since october and the cut announced today, inflation will remain low in 2010 and 2011. as of now, and for the current forecast horizon, upside and downside inflation risks have become symmetrical. monetary policy decision we have just explained the rationale behind our recent monetary policy : first, the global economic situation has worsened, which will hit the swiss economy as from this quarter, and in particular next year. by contrast, the inflation outlook has improved appreciably. this has increased the snb ’ s room for manoeuvre. finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. these are the considerations that have prompted today ’ s decision to cut the three - month libor target range by another 50 basis points. given the expected deterioration in the swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. with this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. inflation forecast chart how has our inflation forecast been revised? the dashed red curve on the chart represents the new forecast. it covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three - month libor remains unchanged at 0. 5 % over the forecasting period. for purposes of comparison, the dash - dotted green curve