Furthermore, recovery varies from one industry to another. Overall, the situation today is much better than many observers had expected at the beginning of 2015. The Swiss economy has once again demonstrated its flexibility by, for example, making swift adjustments to working hours and taking measures to improve production processes. In view of the structural changes taking place, this adaptability will remain key, regardless of developments in the international economy and exchange rates. I’m thinking here of traditional retailing, which increasingly has to compete with internet trading. Digitalisation, too, presents new challenges for manufacturing and finance that will continue to call for major efforts on the part of companies and staff in all the industries concerned. Current monetary policy  What challenges does this situation pose for our monetary policy? We have the statutory mandate to ensure price stability. In so doing, we must take due account of economic developments. Since the beginning of the year, the inflation rate in Switzerland has climbed above zero again (cf. chart 4). As is the case with our trading partners, this is largely driven by oil and food prices. Core inflation is somewhat lower, primarily because of underutilised production capacity. Our current forecast puts inflation in mid-2019 at around 1%. Given low inflation and underutilisation of production capacity, maintaining an expansionary monetary policy in Switzerland is the right course of action to take. The Swiss franc is still significantly overvalued.
The SNB’s investment policy The SNB’s investment policy outlines the principles governing its asset management. Our assets chiefly consist of currency reserves, namely foreign currency investments and gold. A small proportion are Swiss franc assets. In principle, the SNB is able to define its own investment policy. However, due to its monetary policy mandate, the SNB’s investment policy is subject to certain restrictions. It has to be designed in a way that helps the SNB fulfil its mandate. To a certain degree, the function of our investment policy is to serve monetary policy. What does this mean exactly? Objectives  In applying its investment policy, the SNB has two main objectives. The first is to ensure that its balance sheet can be used at any time for monetary policy purposes. Investment policy may not restrict monetary policy in terms of either a possible expansion or a possible reduction of the balance sheet. The investment universe must be designed in such a way that we are able to purchase foreign currency and invest it quickly when necessary. But we must also be able to sell the investments again quickly if monetary policy requires it. The second objective of investment policy is to ensure that the currency reserves preserve their value over the long term. Currency reserves serve to build confidence. They are used not just to overcome, but to also to prevent potential crises. Currency reserves allow us to intervene in the market if the Swiss franc weakens.