However, the potential effects of the latest sharp Swiss franc appreciation should certainly not be underestimated. We have great respect for the businesses and their staff who are now having to make challenging adjustments. At this time, the Swiss economy must – more than ever before – build on its structural strengths and flexibility. Doing so will enable it to preserve its international competitiveness and, with it, the prosperity of our country. Apart from the exchange rate, future economic growth will depend on further developments in the global economy. In this respect, the outlook appears more favourable than in 2011. The US economy is in better shape. In the euro area, the latest economic figures also give cause for more optimism. Nevertheless, considerable risks also exist now, with the Ukraine conflict and the debt problems in Greece. Due to the new exchange rate parameters, the SNB’s conditional inflation forecast has also moved down significantly. For 2015, we anticipate inflation of –1.1% in Switzerland. As the stronger Swiss franc leads to a decrease in import prices. In addition, the very substantial fall in oil prices will move energy inflation deep into negative territory. However, both of these effects are temporary. According to our inflation forecast, the negative inflation phase will be short-lived. Sustained negative inflation or, indeed, a deflationary spiral, are not to be expected. Nevertheless, neither inflationary nor economic developments are optimal. We would prefer slightly positive inflation and more economic growth.
It can be argued that index funds distort the price of the targeted indices and that, as a result, the indices end up creating rather than measuring performance. ·  Last but not least, the impact of risk management techniques on market dynamics is particularly enlightening with regard to the question of asset price overshooting. Value-at-risk calculations have become a crucial element of the standard approach used by market participants to evaluate the risk inherent in their market activities and to set up exposure limits. Of course, central banks and financial institutions should continue to encourage the use of these instruments. But, in times of financial turmoil, the growing use of sophisticated risk management techniques by financial intermediaries might have had the paradoxical effect of amplifying the initial shock, exhausting liquidity and contributing to contagion  3  M. BORDO, B. EICHENGREEN, D. KLINGEBIEL and M. S. MARTINEZ-PERIA: “Is the Crisis Problem Growing More Severe?”, CEPR, September 2000. 4  BIS Review 28/2001  phenomena. Regardless of the intrinsic qualities of these risk management tools, we see that their growing use in the same fashion by all market participants may have produced pernicious effects. When market players rely on converging risk evaluations, they tend to take the same decisions at the same time, thus amplifying the initial shock to prices and trading volumes. All those factors have one consequence in common: they encourage homogenous behaviour and reactions to the detriment of the diversity that is indispensable to the smooth functioning of financial markets.