Finally, problems on the financial markets resulted in a significant drop in stock market transactions. This had a negative impact on added value in the banking sector. However, the slowdown in production did not spread to all sectors of activity. Growth remained strong in the retail and wholesale business, the hotel and catering trade and the transportation and communication industries. This shows that domestic demand remains – on the whole – robust. With the first few months of 2008 seeing a steady flow of new jobs, the favourable climate on the job market continues to be conducive to private consumption in particular. Further growth in demand and production is likely over the next few quarters, albeit at a more modest pace. High prices for oil products and uncertainty related to the US real estate crisis will undoubtedly continue to hamper economic activity. However, growth in household consumption and equipment investment looks set to continue. The SNB continues to forecast GDP growth of between 1.5% and 2% for 2008. However, this average annual growth rate is boosted by the strong growth achieved in the second half of 2007. It therefore conceals what has been a noticeable slowdown in economic activity, with quarterly rates below potential throughout the rest of the year. Changes in the monetary and financial framework How have monetary conditions evolved since our last assessment in March? They have become somewhat more relaxed. This is mainly attributable to two factors.
Jean-Pierre Roth: Recent economic and financial developments in Switzerland Introductory remarks by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank and Chairman of the Board of Directors of the Bank for International Settlements, at the half yearly media news conference, Geneva, 19 June 2008. *  *  *  The Swiss National Bank (SNB) is leaving the target range for the Swiss franc three-month Libor unchanged at 2.25-3.25%. It intends to hold the rate in the middle of the target range for the time being. Despite a slowdown in economic activity, the global economy remains robust and the price of oil has continued to climb. This has led to a general increase in inflation. The situation on the financial markets is still uncertain, but less turbulent than it was a few months ago. Although the Swiss economy has also grown at a slower pace, the SNB has not changed its forecast of real GDP growth of between 1.5% and 2% for 2008. However, it has increased its inflation forecast and is now expecting an average rate of 2.7% in 2008. Nevertheless, assuming that the Libor remains unchanged at 2.75%, inflation should edge back down to 1.7% in 2009 and 1.3% in 2010, as a result of the expected economic downturn. Considerable risks are attached to this inflation forecast. Stronger price increases are likely, should energy prices rise again or the Swiss franc depreciate on the foreign exchange market.