Since the revision of the National Bank Act in 2004, hardly any legal constraints have been set on the SNB’s leeway for investment. The SNB uses this leeway to achieve the optimum possible portfolio structure. Corporate bonds, for instance, were already introduced as an asset class in 2004, and equities in 2005. With the marked expansion of the balance sheet in the past few years, diversification has become increasingly important. In this respect, the SNB goes further than is common practice for central banks. For reasons of diversification, it is constantly evaluating new asset classes, currencies and investment opportunities in both advanced economies and emerging markets. Last year, for instance, the SNB expanded its investment universe to take in both Chinese government bonds and emerging market corporate equities. The SNB’s investment and risk control process is constructed using principles similar to those applied by large institutional asset managers. As you will see in slide 4, it can be split  2  Foreign exchange reserves consist of foreign currency investments minus repo transactions conducted for investment policy purposes and other foreign currency liabilities. BIS central bankers’ speeches  3  up into roughly five steps – investment policy, investment strategy, definition of guidelines and benchmarks, implementation (including tactical allocation of assets and portfolio management), and risk control. The SNB’s investment policy provides the framework for the management of assets and defines the overriding investment objectives.
I am convinced that, under the circumstances, the SNB’s monetary policy is currently the approach that best serves Switzerland’s overall interests in the long term. At our most recent quarterly monetary policy assessment, we therefore decided to maintain our expansionary monetary policy. The interest rate on sight deposits at the SNB is unchanged at –0.75%. At the same time, the SNB will remain active in the foreign exchange market, in order to influence exchange rate developments where necessary. Despite a slight depreciation, the Swiss franc is still significantly overvalued and this is reflected in economic activity. Last year, the Swiss economy only recorded year-on-year growth of just under 1%. For this year, we expect growth of between 1% and 1.5%. Uncertainty is high, however, and conditions remain difficult. Last year, inflation was very low, at –1.1%, due in large part to the slump in oil prices and the appreciation of the Swiss franc following the discontinuation of the minimum exchange rate. The impact of both variables is temporary. For this year, we expect an inflation rate of –0.8%. In the SNB’s view, it is essential that, in the medium term, inflation returns to the range compatible with price stability. And, according to our current inflation forecast, that is what will happen. As you can see from slide 12, we are expecting that, given an unchanged threemonth Libor of –0.75%, the inflation rate will return to positive territory next year. This brings me to the end of my speech.