All in all, the introduction of the euro has been a very positive development for the international monetary system in general, and for Switzerland in particular. We benefit from the greater transparency offered by the euro and the lower transaction costs made possible by its creation. Perhaps for the first time in history, we are surrounded by an area that shares the same monetary policy objectives as we do, namely price stability. This explains to a large extent why the Swiss franc/euro exchange rate has been relatively stable over the past five years. But the presence of a single European currency has per se also shielded third currencies - like the Swiss franc - from too much volatility in the case of dollar turbulence. At the same time, we keep the trump card of an independent monetary policy that enables us to respond very rapidly to the specific needs of the Swiss economy. Between 2001 and 2003, we have thus lowered interest rates more quickly and more decisively than the ECB. Once economic activity showed signs of recovery, we were able to gradually shift to a less expansionary stance, again well  4  BIS Review 72/2004  before any similar move by the ECB. With inflation around the one percent mark, we enjoy price stability and our interest rates lie clearly below corresponding rates in the eurozone. Thanks to enhanced stability in Europe with the introduction of the euro, a two headed international monetary system is good news for small countries.
Here, I must say, our fears proved not just to be unfounded, but the reality turned out to be much more favourable than we could have hoped for. The exchange rate between the Swiss franc and the euro ended up being much steadier than expected, in fact even steadier than it used to be against the German mark, not to mention the French franc and the Italian lira. Over the past six years, the real exchange rate has moved within a relatively narrow band little more than five percentage points wide. Except for the immediate after-September-11 period, when the Swiss franc appreciated significantly, the external value of the franc has largely reflected economic fundamentals. In fact, even the post 9/11 safe-haven effect was relatively mild compared to what we experienced in the past, during the seventies and the eighties, for instance. But vigilance is of the essence. Recent foreign exchange market developments show that in highly turbulent times the Swiss franc can come under upward speculative pressure. This may interfere with our domestic monetary strategy and can eventually trigger corrective policy actions. 4. A new international monetary order  I truly believe that one can make the case that the introduction of the euro has brought about a new international monetary order, that it has produced an element of stability that benefits many countries, not just Europe’s immediate neighbours, but nations around the globe.