The improved economic conditions are expected to gradually translate into higher inflation only in the course of 2018, especially in the euro area. The cautiously optimistic baseline scenario continues to be subject to considerable downside risks; this is due to political uncertainty and structural problems in a number of advanced economies. Swiss economic outlook  I shall now turn to the economic outlook for Switzerland. According to initial quarterly estimates of the national accounts, positive stimuli from abroad were again only partially transmitted to the Swiss economy in the first quarter. Although GDP growth firmed somewhat, it still remained subdued at an annualised 1.1%. What is our assessment of the current economic situation? Overall, available economic indicators suggest that the Swiss economy is on the road to recovery. Export figures and company surveys alike have pointed to an upturn in manufacturing activity since the beginning of the year. Positive developments are also in evidence in significant areas of the services sector and construction. We are gratified to see that the more favourable economic situation and improved business sentiment are reflected, too, by a greater willingness to invest. Page 2/4  Berne, 15 June 2017 Thomas Jordan  News conference  However, certain indicators suggest that the recovery has not yet taken hold in all areas of the economy. Utilisation of production capacity is unsatisfactory in a number of industries, and companies’ profit margins remain tight. These difficulties arise from a combination of economic and structural factors.
Given the likely circumstances in which it would be occurring the tearing up of derivative contracts and winding down of a major clearing service could be a significant shock to the system. In those circumstances, I see a number of reasons why a resolution regime is necessary to provide public sector authorities with the option to step in – if necessary before the CCP has come to the end of its preagreed recovery and wind down actions. In such circumstances, where the actions or inaction by the CCP run the risk of amplifying a systemic problem, it is appropriate that a public authority be capable of intervening to manage that systemic risk and to thereby protect public funds from needing to be used. In contrast to CCP management who will owe fiduciary duties first and foremost to their shareholders, a resolution authority will have powers and duties that require and enable it to act in the interests of financial stability. The benefits of stepping in to stabilise the situation could take a number of forms. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  For example, if ‘voluntary’ measures such as auctions were failing and there was a serious risk of financial contagion from margin gains haircutting, the resolution authority could decide it was better to intervene quickly to tear-up a subset of contracts earlier than would otherwise be permitted under the rulebook. Doing so would return the CCP to a matched book before losses escalated further and before the damage became irreparable.