In the first half of 2007, the SNB continued the policy of normalising the level of interest rates which it has been pursuing for the past three years. Consequently, it lifted the Libor target range in two steps to bring the interest rate to a level that was in line with the strength of the economy and that would ensure price stability in the medium term.
In the second half of the year, the SNB was operating in a new environment. Management of monetary conditions consisted of ensuring, on the one hand, that the healthy state of the economy did not jeopardise price stability in the medium term, and, on the other hand, that the turbulence on the financial markets did not result in a liquidity shortage. Consequently, the aim of monetary policy was to relax monetary conditions sufficiently to ensure that interbank market nervousness did not jeopardise the growth and stability of the Swiss economy, but to do so without any relaxation of vigilance in the matter of price stability.
