These efforts should be put to more productive use. With price stability and trust in place, the list of economic benefits is long. In particular, the price development becomes more stable and predictable. This allows financial markets and businesses to operate more efficiently. As for the National Bank, it can conduct monetary policy more easily with expectations strongly anchored. A key feature of trust is that it must be underpinned by transparency. We too have learned from past experience that Swiss monetary policy gains from increased transparency. Earlier than most central banks, we have embraced the notion that it is better for the conduct of monetary policy if people can understand what their central bank is thinking, doing and why. Transparency also eliminates the doubts that the central bank is working with an informational advantage. Information asymmetries breed mistrust and skepticism. It is much easier to instill trust in an institution if it is open about its goals and strategies. All this enhances the National Bank’s accountability and reinforces the trust we have fostered. What steps has the National Bank taken to improve the transparency of monetary policy? We have a long tradition of setting monetary targets, but since the announcement of our new monetary strategy more than two years ago, the discussion of monetary policy is even more clearly defined by norms, rules and procedures than before. The explicit definition of price stability gives Swiss citizens a yardstick for measuring how the central bank has performed.
The current target range lies between 0.25% and 1.25%. We reacted to the increasing signs from Switzerland and abroad that point to a delay in the economic recovery and slower-than-anticipated economic growth in 2002. We now forecast the average growth rate for real GDP to fall clearly short of 1% in 2002. In addition, the further appreciation of the Swiss franc tightened the monetary conditions, which were regarded to be undesirable under the current environment. Concluding remarks It is more than one year that we are in this difficult economic situation. The loss in business confidence began with the downturn in economic activity lead by a sharp correction in capital spending. The path to economic recovery has been recently overshadowed by the loss in investor confidence, which found its origins in the highly publicized scandals involving fraudulent balance sheets. This setback in investor confidence undermined the required trust in financial markets that the right rules are in place and that those rules are being enforced. Although I am confident that stronger rules will merge to restore trust in financial markets, consensus will not be achieved overnight. Corporations must continue to build on the social capital that is entrusted in them by investors. They should promote the efficient operation of financial matters, and optimize the benefits that markets can bring to everyone in society.