It does not take into account that the evolution of relative exchange rates stems, to a great extent, from a natural compensation for inflation rate differentials. This is particularly relevant to Switzerland, where we have experienced far less inflation than our commercial partners over the last thirty years. If this issue is accounted for, that is, in real terms, the Swiss franc can then be said to have appreciated by around 100% against the US dollar and 70% against the British pound since 1973 and by 14% against the Euro between 1999 and today. We learn more if we take a multilateral viewpoint, based on the real effective exchange rate13. On a statistical basis, it can be argued that the Swiss franc’s effective exchange rate has remained more or less stable, at least from 1990 until recently. This does not mean, however, that it has been constant. On the contrary, it fluctuates constantly around its  12  The Bank of England has reached the same decision regarding the British pound. 13  This rationale and the figures that follow refer to the export-weighted real exchange rate (nominal rates which correct the gaps between price indexes and consumption), as published by the BIS. BIS central bankers’ speeches  5  average.14 You may recall, in particular, that for approximately three years in the mid-1990’s it remained well above its long-term average, then peaking at 12% in 1995. Until now, this was the Swiss franc’s most significant deviation from the long term average observed.
The intervention of the central bank is then viewed as a means of helping market participants to coordinate on valuations which are more in line with the real fundamentals. Today, the Swiss franc remains high and should therefore continue to depreciate in the future. Conclusion As I stated at the outset, we face no shortage of challenges. I have addressed two of them today. The Swiss franc was overvalued to such an extent that the SNB has been forced to take the extraordinary decision of setting a minimum exchange rate. This carefully considered decision reflects the extent to which we live in extraordinary times. Given the prevailing circumstances this summer, to the SNB, this seemed to be the only way in which the central bank could fulfil its mandate to ensure price stability while taking due account of economic developments. Behind the scenes, the rapid and complex evolution of FMIs worldwide is a matter of longterm interest. This infrastructure is central to the functioning of financial markets. It is a challenge of primordial importance to the financial markets. Today, we are the beneficiaries of an effective infrastructure, in part thanks to the adoption of “Gemeinschaftswerk”, a collaborative modus operandi which has permitted a near-perfect alignment of stakeholders’ individual and collective interests. It cannot be taken for granted, however, and it is our collective responsibility to act.