While these criticisms may have some validity, Exter’s wisdom was to create an environment for both the government and the Central Bank to have a peaceful and  8  BIS Review 92/2007  amicable cohabitation. Exter argued in his report that “….there are, however, many important problems of monetary policy, especially those relating to fiscal policy, on which a central bank should work in close harmony with the government”. Accordingly, a degree of independence has been afforded to the Central Bank unlike other governmental bodies. This independence extends to the budget of the Bank, job security of key central bank officials and power to make monetary policy without consulting the government. The wisdom of Exter was that the Central Bank should as far as possible work in consultation with the government, rather than in isolation. He believed that the true independence of the Central Bank could be preserved only through that consultative process. In the words of Exter, “the ideal is….one in which there will be continuous and constructive cooperation between the Monetary Board and the government. The principal instrument for achieving this co-operation should be the Permanent Secretary to the Ministry of Finance whose membership on the Board will ensure at all times that his Minister’s views will be known to the other members of the Board”. However, Exter did not expect this arrangement to be effective at all times. Hence, he made the proviso that “it would depend on the men occupying the key positions” and not on any legal formula.
Thomas Jordan: Monetary policy and financial markets – what may we expect in 2008? Summary of a speech by Mr Thomas Jordan, Member of the Governing Board of the Swiss National Bank, at the Messe Fonds 2008, Zurich, 31 January 2008. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  The problems linked to the US housing and mortgage market dominated international financial markets in 2007. Despite the difficulties on the financial markets in the second half of the year, the global economy was robust last year. For 2008, the outlook for global economic growth has deteriorated and become more uncertain. The turbulence in the financial sector led to a considerable increase in risk premiums in 2007. In the past few years, these premiums had been very low, and even after the recent increase they remain modest by historic standards. Due to the higher level of economic uncertainty in 2008, the process of adjustment in risk premiums looks set to continue in various markets. From the current standpoint, the Swiss National Bank anticipates a somewhat slower pace of growth for Switzerland in 2008, although the economy should remain robust. However, the risks have increased in the recent period. As a result of the oil price hikes, inflation in Switzerland is likely to rise above 2% in the first half of 2008. Despite raised stock exchange volatility, the SNB does not judge that any additional actions are necessary at present.