Moreover, a portion of existing international investments is even being repatriated to Switzerland. This has very substantially increased private demand for Swiss francs, resulting in upward pressure on the currency. 1  4  At the end of 2012, Switzerland’s foreign assets amounted to some CHF 3.5 trillion, of which approximately 85% were invested in foreign currencies. BIS central bankers’ speeches  Some of this was absorbed by the high levels of foreign currency purchases by the SNB in recent years. Thus, responsibility for upward pressure on the Swiss franc cannot be attributed to foreign investors alone. Swiss franc investment must therefore be made less attractive for all investors. As I have just explained, it is inappropriate to differentiate between domestic and foreign investors from a monetary policy point of view. Since foreign interest rates are close to zero or negative, Swiss interest rates cannot remain at zero. They have to move into negative territory in order to restore the traditional interest rate differential. Criticism of negative interest Let me now discuss negative interest in more detail. As I have explained, negative interest helps to make investment in Swiss francs less attractive and thereby limit net inflows into our currency. This reduces upward pressure on the Swiss franc and eases monetary conditions. We are aware that the current low interest environment is very challenging for investors, especially pension funds. Acceptable investment options are limited.
A sustained rise in medium-term inflation expectations would represent a threat to our price stability mandate and would not be tolerated.” [http://www.newyorkfed.org/newsevents/speeches/2011/dud110228.html]  6  BIS central bankers’ speeches  and salaries are reflecting heightened unemployment, and show no evidence that potential inflation concerns are placing upward pressure on wages and salaries. Core inflation rates tend to be a reasonable predictor of inflation in the intermediate term. Core inflation remains well below my long-run target for inflation. This gives us flexibility to focus on accommodative monetary policy doing what it can to promote more rapid growth in the economy. As Figure 18 illustrates, the percent of the adult population that is employed now is quite low in relation to recent history, and has shown only a slight improvement over the course of the recovery. So with significant slack in labor markets, stable inflation expectations, and core inflation well below our longer run target, there is currently no reason to slow the economy down with tighter monetary policy. Until we make more progress on both elements of the Federal Reserve’s mandate – employment and inflation – the current, accommodative stance of monetary policy is appropriate. Thank you.