The SNB is now expecting inflation of 0% in the current year and 0.4% in 2015. In 2016, inflation should increase to 1.0%. Furthermore, the value of the Swiss franc is still high. With the three-month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc. Through the minimum exchange rate, therefore, we are in a position to fulfil our price stability mandate. However, the consistent enforcement of the minimum exchange rate has contributed to the substantial increase in our currency reserves. Slide 1 shows that, since 2009, our currency reserves have increased by a factor of about six, and the foreign  BIS central bankers’ speeches  1  exchange reserves are almost ten times higher. Our foreign exchange reserves, that is, currency reserves excluding gold, currently amount to almost CHF 450 billion, which is over 70% of Switzerland’s annual economic output. The expansion of our foreign exchange reserves means that our balance sheet is more exposed to the volatility of the financial markets than it used to be. Even slight price changes can have a strong influence on our investment performance. This has made our investment policy even more challenging. However, thanks to established processes and a high level of expertise, we are in a position to meet these demands.
And so the foundation was laid for a modern investment policy whose aim is to optimise the risk/return relationship for assets. However, this was only possible to the extent allowed by monetary policy, which has always had priority over investment policy considerations. In addition to expanding the SNB’s freedom of action, investment and risk control processes were fundamentally adapted and adjusted to the new requirements from 1997 onwards. As a result, the SNB frequently found itself in the role of central bank pioneer, not only as regards the choice of investment instruments, but also in the area of investment processes. It is with some pride that I can report how, in recent years, we have received enquiries from other central banks about our investment processes. The SNB has also played a pioneering role with regard to transparency. The composition of our investments is, to a large extent, accessible to the public. Indeed, the SNB is one of the few central banks which publishes both its investment allocation and the net result on foreign currency positions on a quarterly basis. Investment policy committed to security, liquidity and return Nowadays, therefore, when investing our currency reserves, we base our decisions on the criteria of security, liquidity and return. The currency reserves of a country serve primarily as a means to prevent and overcome crises. In order to fulfil this function, they must, in essence, be liquid. In the past, the SNB defined liquidity by specifying the term of the bonds.