By contrast, the inflation outlook has improved appreciably. This has increased the SNB’s room for manoeuvre. Finally, there is a risk that the financial crisis will cause a deterioration in financing conditions for the economy as a whole. These are the considerations that have prompted today’s decision to cut the three-month Libor target range by another 50 basis points. Given the expected deterioration in the Swiss economy and the imponderables linked to the long and variable monetary policy transmission lags, a further rate cut appears appropriate. With this action we are reducing, to the extent possible, the risk of an even more pronounced economic downturn. Inflation forecast chart How has our inflation forecast been revised? The dashed red curve on the chart represents the new forecast. It covers the period from the fourth quarter of 2008 to the third quarter of 2011, and maps the future development of inflation on the assumption that the three-month Libor remains unchanged at 0.5% over the forecasting period. For purposes of comparison, the dash-dotted green curve shows the inflation forecast of the September monetary assessment, based on a three-month Libor of 2.75%. The new forecast shows a rapid fall in inflation over the next few quarters. It drops back below the 2% mark as from the fourth quarter of this year.
As I stated in my introduction, such an assessment is very useful for us, and we will take the committee's recommendations on board in our work going forward. Thank you for your attention. 3/3  BIS - Central bankers' speeches