On the structural side, globalisation may have reduced the responsiveness of inflation to domestic cyclical conditions but empirical evidence for the euro area is not clear-cut.3 Other potential factors include demographic trends or changes in behaviour triggered by technological developments, which may contain price pressures, for instance through increased price transparency. However, even if these factors are somewhat more persistent, they should still not exert a permanent impact on inflation. Overall, the analysis indicates that the relationship between growth and inflation remains largely intact, even if it has temporarily weakened in recent years to the extent that the speed of adjustment in inflation towards our aim has been affected. Looking ahead, we anticipate that headline inflation will resume its gradual upward adjustment, supported by our monetary policy measures. At the same time, uncertainties continue to prevail. In particular, the recent volatility in financial markets, notably also in the exchange rate, deserves close monitoring with regard to its possible implications for the medium-term outlook for price stability. Therefore, while the strong momentum of the euro area economy has clearly strengthened our confidence in the inflation outlook, patience and persistence with regard to monetary policy is still needed for inflation to sustainably return to levels of below, but close to, 2%.
Philipp Hildebrand: The Swiss National Bank and the financial crisis Summary of a speech by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the Club of Rome Forum, Zurich, 20 January 2011. The complete speech can be found in German on the Swiss National Bank’s website. *  *  *  Since August 2007, central banks have been continually at work, fighting the crisis. They have had to stabilise the financial system and limit the extent of the economic downturn. In many countries, the repercussions of the financial crisis are reflected in both government finances and central bank balance sheets. In Switzerland, these repercussions – i.e. the costs of the financial crisis – have had relatively little impact on the budgets of either the Confederation or the cantons. The costs are mainly to be found in the SNB’s balance sheet, at the moment largely in the form of risks. The SNB balance sheet has significantly lengthened, particularly as a result of foreign currency purchases. Inevitably, the large holdings of currency investments means greater risk. As the SNB announced on 14 January 2011, it is expecting a substantial loss for the year 2010. This is mainly attributable to exchange rate losses on foreign currency investments. In view of these losses, it is very tempting to argue that the SNB should not have purchased any foreign exchange. However, the purpose of the SNB is not to make a profit.