The current weakness of the dollar, although it had been expected for some time, is a cause for concern for us especially as it comes at an unfavourable time. We watch therefore the exchange rate development very closely. In the present economic situation it is not easy to identify positive factors. One of them is definitely the environment of price stability and strong competition which is keeping inflationary expectations at an historical low level. As a result, monetary policy can remain expansionary. This is clearly the case in Switzerland. A second positive element are the structural adjustments. In Switzerland, the private sector has adjusted courageously to the new low-growth environment in which the price/quality ratio becomes a key factor of success. I think that our economy is well positioned now to benefit fully from an upturn in international trade. Last but not least - and here we join Poland - our main source of hope lies in Europe. Since Switzerland is heavily dependent on exports, sluggish economic performance in Europe, and especially in Germany, is a major cause for concern. But there are now signs of hope : the German government is considering a reform programme which should increase potential growth, and manufacturing orders are improving; in France GDP growth is positive; in the UK industrial production is accelerating again. We can now expect a gradual improvement in the overall economic picture and a progressive strengthening of consumer and investor confidence.
Switzerland as an independent monetary zone  As is the case in most countries today, the Swiss National Bank pursues a monetary policy that is independent of the political authorities. We regard this independence as a key prerequisite for a successful policy. Our main goal is to maintain price stability. Thereby we create the basis for rational investment and expenditure decisions, and we contribute to a balanced economic growth. Price stability has been the traditional objective of our policy for decades, but our monetary strategy had to be adapted to changing circumstances. Following the transition to floating exchange rates some 30 years ago, monetary policy was based on the control of the monetary aggregates. We had to fight against inflation by far exceeding today’s levels. Inflation could be sustainably reduced in the second half of the 1990s, although the monetary aggregates became increasingly unreliable as monetary indicators. Monetary policy needed to be redesigned. In 1999, we adopted a new strategy based on three elements: ·  The first element is an explicit definition of price stability: price stability is achieved when inflation, as measured by the consumer price index, is less than 2%. We want to achieve this objective over the medium term since controlling inflation on a short-term basis would translate into high costs to the national economy. A monetary policy geared to medium-term price stability also helps to smooth out cyclical fluctuations.