But our approach to those forecasts has evolved as we have gradually oriented ourselves in the new economic territory we have found ourselves in. In our first Monetary Policy Report (MPR) following the outbreak of the pandemic, published in May 2020 (shown in orange), the impact of Covid was still so uncertain that we felt unable to publish a single central forecast. Instead what we published was a “plausible illustrative economic scenario”, together with estimates of the sensitivity of the economy to some key variables. The scenario and accompanying estimates were nothing like our usual detailed map of the outlook. But they served as an initial outline of what a future map might look like. As time passed, and as Figure 1 illustrates, we began to fill in the picture. By August 2020 (shown in grey) we felt able to publish a forecast once more; but it was a forecast that came with a higher-than-usual degree of uncertainty and a larger-than-usual downside skew, as captured in our published fan charts. By November (yellow) some of those downside risks had crystallised, in the form of a new rise in Covid cases and an associated increase in restrictions. And while by February 2021 (dark blue) the vaccination programme had begun, it was too early to be certain about how successful it would be, and the risks remained to the downside.
In Switzerland, responsibility for benchmarks lies, in principle, with the private sector and these benchmarks are not regulated. Nevertheless, the SNB is particularly interested that benchmarks for interest rates and exchange rates should be credible, since they are important for well-functioning financial markets and for the implementation of monetary policy. That is why the SNB has supported reform efforts in the area of benchmarks by taking part in various national and international working groups. I have reported here on these efforts on several occasions. The FSB has published two final reports since our last media news conference, so this provides me with a good opportunity to draw some initial conclusions. Benchmarks for interest rates As regards benchmark interest rates, the final report recommends pursuing two main approaches in the future. First, existing interest rate benchmarks should be further improved. Second, efforts should be made to develop alternative benchmark interest rates. Thus the two-pronged approach for the future envisages, alongside improved Libor interest rates which would still be based on unsecured money market transactions, the emergence of more benchmark interest rates related to repo transactions or other near risk-free transactions. The FSB’s final report states that significant progress has already been achieved with the Libor rates. However, not all of the requirements set by the securities regulators (IOSCO standards)1 have so far been met. In particular, it still remains unclear whether the markets upon which the interest rates are based are sufficiently liquid. A certain level of liquidity is needed to ensure robust benchmark rates, i.e.