The MPC sees a 50% chance of inflation exceeding its target two years hence. Outside professional forecasters put that probability at just over 40%. Only around a third of companies and a quarter of households expect inflation to be above the target at that point. 9 The balance of risks, as perceived by those setting and receiving wages, is skewed squarely to the downside. That leads naturally to questions of monetary policy strategy. There is clearly a tightrope to walk here: lean too much in an expansionary direction and the inflationary cat is let out of the bag (assuming it isn’t already stuck in the tree with that kite); lean too much in a contractionary direction and the recessionary gorilla is unleashed (ditto). The asymmetric risks posed by the effective lower bound have led some to suggest that the optimal strategy is to leave rates “lower for longer” (Evans et al (2014)). The argument here is that it is better to err on the side of over-stimulating, then course-correcting if need be, than  9  The professional forecasters’ probability is taken from the Bank’s Survey of External Forecasters for 2015 Q2. The company data are from the Deloitte CFO survey for 2015 Q1, and are based on an assumption that half of those companies that report that their two year ahead CPI inflation expectation is in the 1.5–2.5% bucket expect inflation to be above 2%. The household data are derived from the Bank/GfK inflation attitudes survey for 2015 Q2.
Jean-Pierre Danthine: Swiss monetary policy and Target2-Securities Introductory remarks by Mr Jean-Pierre Danthine, Member of the Governing Board of the Swiss National Bank, at the end-of-year media news conference, Zurich, 16 December 2010. *  *  *  My remarks today will focus on three topics. I will start by looking at the situation on the international financial markets. I will then speak about the SNB’s own financial market activities in connection with the two core tasks of monetary policy implementation and foreign exchange reserves management. Finally, I would like to briefly discuss the planned panEuropean securities settlement system, Target2-Securities. International financial markets The situation on the international financial markets reflects the gradual global economic recovery. At the same time, these markets continue to be affected by the fallout from the financial crisis and by doubts as to whether the current global economic recovery will be robust enough to reduce the existing financial imbalances. On the stock markets, volatility has trended downwards over the past half-year, but has remained high. Shares and corporate bonds have benefited from investors’ growing risk appetite, the ongoing expansionary monetary conditions and good corporate results. On the bond markets, by contrast, uncertainty has, if anything, grown. With the global economic recovery, yields on long-term government bonds have picked up from their low levels. In Europe risk premia for heavily indebted sovereigns have risen markedly. The imbalance in many government budgets has taken problematic proportions.