M1 and M2 have shown strong growth. The significance of these growth rates is limited because the uncertainty linked to the crisis reinforced the general public’s preference for liquidity, and because interest rates are at extremely low levels. It is therefore useful to analyse the transmission of monetary stimuli through the lending channel as well. Mortgage loans provide a particularly good reflection of the effects of monetary policy. Why? Essentially, mortgage loans are used to finance real estate projects. But the yields on these investments, which are by their very nature long-term, are heavily dependent on the level of interest rates. This relationship has been confirmed once again: no sooner did we cut interest rates than the growth rate of mortgage loans began to increase more strongly. Having hit a low of 3.2% in November 2008, the growth rate then began to accelerate steadily, reaching 5.1% in October 2009. In the same month, other lending in Swiss francs declined at a rate of –0.3%, which is normal during a period of weak economic activity. All in all, lending to households and firms, both large and small, has continued to grow over the past few months, as the growth in mortgage lending has largely offset the drop in other lending. According to the latest SNB bank lending survey, the phase of tightening lending conditions could be coming to an end.
An appreciation of the Swiss franc against the euro would run counter to the relaxation in monetary conditions brought about through the interest rate channel. This is why the SNB will continue to act decisively to prevent any excessive appreciation of the Swiss franc against the euro. An assessment of monetary conditions can be misleading if it is based on prices, which, like currently the libor, have reached a bound. For this reason, an assessment based on quantities – money and credit – is particularly important in the current circumstances. The monetary base has increased substantially since October 2008, when the financial crisis entered a new phase following the collapse of Lehman Brothers. We supplied the interbank market with sufficient liquidity to meet burgeoning demand in a climate of uncertainty, in order to prevent any increase in money market rates. Since then, precautionary base money demand has declined and we have reabsorbed liquidity accordingly. The monetary base has thus fallen by 28% compared to the peak recorded in April 2009. The level of sight deposits is, however, still almost ten times higher than before the crisis. There is thus a risk of excessive money creation once confidence is restored. Monetary conditions should not be judged in terms of banking sector liquidity, but rather on the basis of the liquidity available to households and firms – i.e. the monetary aggregates. M3 growth, which had been modest for a long time, has accelerated. In October, it reached an annual rate of 7.7%.