For five quarters it persisted at this level. Today’s adjustment of our monetary policy should not be seen as a changeover to a restrictive policy. Our interest rate increase is merely to be regarded as an appropriate step towards more neutral monetary conditions following a lengthy period of extraordinary circumstances. It is an indication that we view economic prospects more optimistically and that we trust the economic upswing in Switzerland to be robust. Our monetary stance remains expansionary. Every forecast and every decision is fraught with uncertainty and risks. Should the economic recovery be delayed due to unexpected events or should the Swiss franc appreciate markedly, we shall react appropriately. As in the past, the Swiss National Bank shall keep all its options open. Observed inflation June 2004  BIS Review 39/2004  3  Inflation forecast on March 2004 with Libor at 0.25% and of June 2004 with Libor at 0.5%  Inflation forecast of June 2004 (98 kb)  4  BIS Review 39/2004
For some time, efforts have been under way worldwide to reform major reference interest rates such as Libor. These reforms aim to put existing benchmarks on a more solid footing and, where necessary, to develop alternatives. In the case of Libor, these reforms are still ongoing. In the context of these reforms, a decision has already been made to discontinue the TOIS fixing on the Swiss money market and replace it with SARON at the end of 2017. This is due to the fact that, despite various reform attempts, the volume of transactions underlying the TOIS reference rate has remained too low for efficient price formation. Transaction volume is not expected to be an issue with SARON. Unlike the TOIS fixing, which is calculated using data contributed by a panel of banks, SARON is based on actual market transactions and binding quotes. This fact reinforces trust in SARON and makes it more attractive as a reference rate for all money market transactions. Progress has already been made in establishing SARON on the Swiss money market. For some weeks now, it has been used as the reference rate for interest rate derivatives; hence, quotes for SARON interest rate swaps (SARON swaps) are already being offered. We can observe this in chart 4, which plots the curves for TOIS and SARON swaps. We see that the yield curve for SARON swaps already covers all maturities. Moreover, the SARON yield curve is below the TOIS curve.