Since last November, the three-month Libor had been held at the desired level of 0.25%. However, from mid-May it began sinking rapidly and is currently well below that level. The fall in the rate is a sign that the banking system is currently holding a very large amount of liquidity. My colleague, Jean-Pierre Danthine, will talk about this in greater detail. Interest rates on the capital market have also fallen. In June, yields on 10-year Swiss Confederation bonds fell to a record level. The low capital market interest rates reflect a higher demand for Swiss government bonds. In addition, long-term inflation expectations continue to be firmly anchored. Private companies are also benefiting from low interest rates on capital markets. Credit risk premia have fallen further and rates of interest on bank loans are also at a very low level. Since the last monetary policy assessment, the Swiss franc has appreciated against the euro. It has simultaneously depreciated against the US dollar. As a result, the trade-weighted external value of the Swiss franc has only slightly increased. The expansionary monetary policy is also reflected in the monetary aggregates. Thus, the monetary base rose to a record CHF 128.6 billion in May, and growth of the monetary aggregates is continuing at a high level. For example, M2 was growing at 10.2% in May and M3 at 7.1%. Credit growth also increased further. After slowing to 2.7% in September 2009, the rate of growth increased to 4.1% in April.
This could affect the real economy via a loss of confidence on the part of households and companies as well as through an additional burden on banks. At the same time, there are upside risks for the global economy. Domestic demand in the emerging economies and the US could, once  BIS Review 85/2010  1  again, prove surprisingly robust. In Europe, export activity could increase more strongly than expected. Swiss economic outlook In Switzerland, the economic recovery has continued. In the first quarter of 2010, real GDP rose by 1.6% on an annualised basis, and was 2.2% above the year-back quarter. Economic activity was mainly driven by household demand and exports of goods and services. The firming of the economic recovery led to a renewed rise in the demand for labour, and short-time work fell significantly. Since the beginning of the year, seasonally adjusted unemployment has also fallen slightly. Leading indicators for labour demand are pointing upwards. The SNB anticipates a gradual improvement in the labour market. Despite the uncertainties in connection with public finances in many countries, global economic activity is still having a supportive effect. Consequently, capacity in the export sector is likely to be increasingly better utilised. Consumption and construction investment will be supported by the improved labour market outlook and the expansionary monetary policy. The SNB expects real GDP to increase by approximately 2% for 2010 as a whole. Monetary and financial conditions The expansionary monetary policy is reflected in monetary conditions.