On the other, the fiscal and monetary policy measures implemented could support the recovery more strongly than anticipated. Swiss economic outlook  Through to late summer, the Swiss economy also recovered markedly and more strongly than originally expected from the first wave of the pandemic. Following a record increase, GDP Page 2/4  Zurich, 17 December 2020 Thomas Jordan  News conference  was still 2% below the pre-crisis level in the third quarter, having been more than 8% below in the second quarter. However, in October coronavirus also spread rapidly again in Switzerland. This has resulted in a renewed deterioration in the economic outlook, at least in the short term. The containment measures implemented thus far are restricting economic activity less than was the case in the spring. However, certain industries are severely affected again, above all hospitality and entertainment. Sentiment is also subdued in other industries. Economic momentum is thus likely to be weak in Q4 2020 and Q1 2021. We expect that GDP will shrink by around 3% this year. At our monetary policy assessment in September, we had anticipated an even stronger decline. The revision is due to the fact that the decrease in GDP resulting from the first wave of the pandemic was not as substantial as originally expected. Developments going forward largely depend on how successfully the spread of the virus can be contained in Switzerland and abroad. Our assumption is that there will not be a significant easing in the containment measures in Switzerland until the spring.
There is a very nice paper in the latest NBER issue which is called “When Inequality Matters to Macro and Macro Matters for Inequality”. So indeed, that places within macro the question of inequality – inequality which has been increasing too much in the past few decades. Changes are being discussed and are taking place I just hope that progress could be quicker. How does that impact central banking? We thought we could just target inflation, now you are saying the next generation has to consider all of these different preferences of agents, multiple equilibria, inequality... Well first of all, central banks will always focus mostly on control of inflation, or more broadly macroeconomic stabilisation. The regime of flexible inflation targeting will not change in the visible horizon, and that is because it allows central banks to take a medium-term perspective towards hitting the inflation target. The advantage of adopting this gradualist approach to reaching the target, is – as [leading monetary economist and former Riksbank official] Lars Svensson has demonstrated very convincingly – that you can allow for some consideration of stabilisation of the 6/8  BIS central bankers' speeches  economy in trying to move gradually towards the inflation target. What will change are the models used to analyse the consequences of policy – and the set of instruments that will have to be used. Central banks in the future will have to respond in a different way if they want to achieve the overall objective of reasonable inflation and macroeconomic stabilisation.