Any one who travels outside the United States today returns with an appreciation about how rapidly public infrastructure is improving in many parts of the world, relative to what is evident in many parts of the United States. As global markets become more integrated and companies and capital can move more freely across borders, policymakers will face new challenges in the design of regulations. They will have to look more carefully at the balance of benefits and costs, when companies have more choice about where to invest. They will have to find ways for regulations to evolve more quickly in response to developments in markets. They will have to explore ways to cooperate more closely with other governments, where national approaches alone cannot be effective. We need to get used to a world in which we will see, in many areas, less willingness to adopt a U.S. model or to defer to a U.S. view on the appropriate global standard. You can see some of these dynamics in the financial arena, and concern about the erosion in the relative position of the U.S. financial system. Financial markets outside the United States are now deeper and more liquid than they used to be, making it easier for companies to raise capital domestically at reasonable cost. These financial markets are at an earlier stage in the process of capital market development, and they will therefore experience rapid growth in securitization and the role of derivatives.
What is more, the Swiss franc has only seen a moderate rise against the euro. As Swiss households and companies are on a solid financial footing, they are shielded – so to speak – against a tightening in credit conditions. Lastly, the stronger Swiss franc vis-à-vis the US dollar has limited the impact of higher commodity prices. Several other factors, like a robust labour market and a competitive industrial sector, could cushion the negative repercussions of the financial crisis in Switzerland. Against this backdrop, the SNB is expecting real GDP to grow between 1.5% and 2% this year. Inflation should be below the 2% mark again in the course of 2008. These forecasts still involve substantial uncertainties. Given the present state of the economy, the current interest level seems to be appropriate. However, the SNB will keep a close eye on further economic developments and inflation so that it is able to identify when action needs to be taken and react in a quick and flexible manner. BIS Review 51/2008  1