The weighted average yield on 10-year euro-area sovereign debt is similar to that in the UK, at close to 1%. And yet, the euro area’s fiscal deficit is half that in the UK. Its structural deficit, according to the IMF, is around one third as large. It is difficult to avoid the conclusion that, if the euro zone were a country, fiscal policy would be substantially more supportive. 15 See Blanchard, O. and Milesi-Ferretti, G.M. (2011), ibid. 16 The macro policies included in the IMF’s analysis are fiscal, credit, foreign exchange reserves, the social safety net (proxied by spending on health) and capital controls. For Germany, for example, the IMF estimate that only 0.6pp of the assessed 4.8% excess current account surplus is due to an overly tight domestic policy mix relative to other countries and a further 0.8pp is accounted for by the policy mix being too loose elsewhere. In China, the IMF analysis indicates a tightening of domestic policies is needed, which would increase the current account surplus rather than reduce it. For more detail, see the IMF’s 2016 External Sector Report, available at https://www.imf.org/external/np/pp/eng/2016/072716.pdf. 17 See the IMF 2016 External Sector Report, available at https://www.imf.org/external/np/pp/eng/2016/072716.pdf. 13  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 4: Excess current account balances and policy gaps in 2015  Source: IMF July 2016 External Sector Report. Notes: The countries labelled in the chart are China (CN), Germany (DE), Japan (JP), the United Kingdom (UK) and the United States of America (US).
The negative interest rate and our willingness to intervene in the foreign exchange market as necessary remain essential. In so doing, we are keeping the attractiveness of Swiss franc investments low and reducing upward pressure on our currency. Page 1/4  Berne, 13 December 2018 Thomas Jordan  News conference  The new conditional inflation forecast for the coming quarters is lower than it was in September. This is mainly due to the drop in oil prices. The medium-term inflation forecast is also slightly lower owing to more moderate growth prospects. For the current year, we continue to anticipate inflation of 0.9%. For 2019, we have revised our forecast down from 0.8% to 0.5%. For 2020, we expect inflation of 1.0%, compared with the previous forecast of 1.2%. The conditional inflation forecast is based on the assumption that the three-month Libor remains at –0.75% over the entire forecast horizon. Global economic outlook  I would now like to turn to economic developments abroad, as these have a considerable bearing on the inflation and economic outlook in Switzerland. The global economy is somewhat less robust than it was a few months ago. Although the pace of growth remains strong worldwide, it is no longer quite as pronounced as at the beginning of the year. One reason for this is that the economic recovery is already well advanced in many countries, and momentum is slowing as a result of the high utilisation of production factors. Another reason is that a number of uncertainties are hampering growth.