In future, the ECB will no longer lay down the reference value for the money supply M3 every year but will keep it unchanged for longer periods of time. In communicating its monetary policy decisions, the ECB will, other than in the past, first comment the general price and economic development and only afterwards the development of the money supply. Furthermore, the ECB has confirmed its definition of price stability. It considers price stability to have been achieved when the inflation rate is below 2%. At the same time, the ECB has announced that it will now be aiming at an inflation rate of nearly 2% in the medium term. The National Bank defines price stability in the same way as the ECB. The question thus arises whether we, too, should as a principle aim at the upper level in the range of price stability. We see no reason to make any changes in our concept. Switzerland is a small open economy and the proportion of imported goods in the national consumer price index amounts to 25%. As a result of exchange rate fluctuations, the inflation rates are significantly more volatile than in the euro area. There is therefore no sense in aiming at an excessively narrow range of inflation. Such temporary fluctuations in inflation do not pose a problem for the Swiss economy and should not be countered by means of special monetary policy actions.
The marked deterioration in the labour market makes for more uncertainty and depresses consumer sentiment. Even though there are first signs suggesting a stabilisation of demand for capital goods, corporate investment activity is still at a low ebb. Despite the weaker franc against the euro, incoming orders and the order backlog stayed at an unsatisfactory level up until April. Capacity utilisation in the industry remains inadequate. Swiss gross domestic product is therefore not likely to grow in the second quarter of 2003 either. Any recovery of the Swiss economy is dependent on a sustained increase in growth in exports, which should then lead to a turnaround in the currently still weak capital spending. We expect that this upswing will set in gradually in the second half of 2003 and then continue at a more vigorous pace next year. Private consumption should also pick up a little more. GDP growth is therefore likely to increase somewhat in the second half of the year but will nevertheless remain moderate. In the current year we anticipate real economic activity to stagnate overall. For next year we expect a perceptible economic upswing. We are likely to see a continued rise in unemployment to the end of the year and do not expect the labour market to improve before the middle of 2004. Inflation forecast I shall now turn to the course of inflation and our new inflation forecast.