Thus, the three-month euro Libor, which had generally been 1.5% higher than the three-month Swiss franc Libor, saw its spread widen to 2.2% in 2007 and 2.7% in 2008. Our policy of stabilising the three-month Swiss franc Libor therefore enabled us to at least partly shield the Swiss economy from the repercussions of the international financial crisis. Unfortunately, the effect of relaxing monetary conditions since last autumn in order to lower the Libor was largely offset by the continuing appreciation of the Swiss franc against the euro. Between October 2008 and March 2009, our currency rose by nearly 10% vis-à-vis the euro, which was particularly inopportune in a phase of rapidly declining inflation rates and the contraction of global demand. On 12 March, to prevent the ongoing appreciation of the franc from neutralising the impact of our policy of lowering interest rates, we decided to buy foreign currencies on the foreign exchange market in conjunction with a further reduction of the Libor, with the aim of avoiding any further appreciation of the Swiss franc against the euro and injecting additional liquidity into the economy. In view of the risk of deflation, decisive action was called for, and we will continue to pursue this strategy for as long as the risk remains. Therefore, after 15 years of absence, we were obliged to intervene once more in the foreign exchange market. This does not, however, represent any reversal of our traditional strategy, which is to pursue an independent monetary policy aimed at maintaining price stability.
It is simply a case of adapting the implementation of this strategy to an environment characterised by interest rates close to zero and a Swiss franc once again in the role of a safe haven. Contrary to certain reactions aired in the media, the action to counter the rise of the Swiss franc against the euro is not a form of competitive devaluation, which would inevitably work against the interests of our country in the long run. Rather, it is a key operational tool which, under the given circumstances, helps us perform our mandate with regard to price stability, in other words to preserve our economy from both inflation and deflation. The outlook for 2009 The year 2009 will see the steepest decline in Switzerland’s GDP since 1975. Exports, normally the driving force of our economy, will continue to be weak, and the lack of confidence in the corporate sector will weigh on investment demand. Moreover, all signs point to a further slackening of consumption in view of growing uncertainty about households’ purchasing power. All in all, the outlook for the near future is anything but bright. Switzerland does not constitute a special case – all industrialised countries are faced with a similar downturn, especially those with high exposure to foreign trade.