The bulk of the medium-term impact from the asset purchases should come from the stock of purchases not the flow. There will be approximately £ extra money stimulus in the system, until the MPC decides to withdraw it (or to increase it). When the time does come to unwind the purchases, the MPC will face a number of difficult decisions. First, it will have to decide at what point monetary policy should be tightened. That decision will, as with any decision to expand the purchases further, be judged on a month-bymonth basis, taking into consideration developments in the economy, and the outlook for our mandated target, CPI inflation. As the Governor said in June 13 , when the MPC does want to tighten policy, it is most likely to raise interest rates first. Gilt sales would be started later and conducted in an orderly programme over a period of time. That would leave Bank Rate as the active or “marginal” instrument of monetary policy. Second, the MPC will have to decide how fast to sell the gilts. Again, that would depend on the outlook for inflation at the time, so we cannot commit now to any particular scale or pace. But it is not in the interests of the UK economy to generate unnecessary volatility in the gilt market.
In this respect, it is important to emphasise that monetary policy considerations always take precedence over those regarding the SNB’s balance sheet risks. It is therefore worth repeating that there is a very high level of uncertainty in the international environment. An appreciation of the Swiss franc would again expose the Swiss economy to considerable risks and, once more, endanger both price stability and economic situation. Given this state of affairs, the SNB will continue to enforce the minimum exchange rate with utmost determination and, should the economic outlook and the threat of deflation require, is prepared to take further measures at any time. Concluding remarks In closing, I would like to summarise my message. The unconventional measures the SNB and several other central banks continue to implement are tailored responses to exceptional circumstances. Their impact should nevertheless not be overestimated, and the associated risks must be recognised. Central banks are the guardians of price stability. Taking the broad economic situation into consideration, they can promote conditions that are conducive to growth. But central banks are not almighty. Monetary policy does not create wealth in and of itself, only financial and economic actors can harness the very best of their innovative, technological and creative talents to generate value and promote sustainable growth. References Gurria, Angel, OECD Secretary-General. 2012. “Policy priorities for a stronger, cleaner and fairer Swiss economy.” Remarks delivered at the launch of the 2012 OECD Economic Survey of Switzerland. 24 January 2012. International Monetary Fund. 2012.