Philipp Hildebrand: Global and Swiss economic outlook Introductory remarks by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 16 December 2010. *  *  *  The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. It is leaving the target range for the three-month Libor unchanged at 0.00–0.75%, and intends to keep the Libor within the lower part of the target range at around 0.25%. The global economic recovery is continuing. While the growth dynamic in emerging economies is vigorous, the recovery in the industrialised economies remains modest overall. Growth in Switzerland was robust in the third quarter of 2010, but the weakening of exports, in particular, points to a significant reduction in growth in the quarters ahead. The SNB expects GDP to grow by some 1.5% in 2011, following growth of about 2.5% in the current year. Monetary policy operates in an environment of heightened uncertainty. Concerns about stability in the euro area have led to renewed financial market tensions. Against this backdrop, the Swiss franc has again appreciated. Should these tensions be exacerbated and put a strain on economic developments in the euro area, this would also have a detrimental effect on the Swiss economy. If a deflation threat emerges, the SNB would take the measures necessary to ensure price stability. The SNB’s conditional inflation forecast for 2012 and 2013 is slightly below the September forecast.
Rather, the Bank estimate was developed in the spirit of trying to give some guidance to the members of the MPC on the relative weights that they should attach to the conflicting pictures painted by the Halifax and Nationwide indices. The house price index constructed by the Department of Environment, Transport and the Regions is also helpful in this respect. That index has the advantage that it is constructed using a more complete method for adjusting for the mix of houses transacted than the Bank estimate, but it is based on only a small sample - approximately 5% - of mortgage-backed transactions. The Bank estimate suggests that house prices increased by 9.0% in the year to 1997 Q4, compared with 6.9% measured by Halifax and 12.9% by Nationwide. The Bank estimate is broadly consistent with the DETR index, which shows a 7.9% increase over the same period. But further work is required on this issue which is of importance to us all. “Divided we stand, united we fall” That brings me to the Monetary Policy Committee and the prospect for interest rates. The transparency of the new process means that the debate about monetary policy within the MPC is explained clearly to the world at large. Hence the reasons why monetary policy is so finely balanced are, I believe, now widely understood. But it is not just the policy debate which is now more transparent. The voting record of each individual member of the MPC is in the public domain.