In addition to the difficult economic climate and the substantial degree of uncertainty on financial markets, the high risk of deflation was a further area of concern for the SNB. In spring, the economic crisis and the appreciation of the Swiss franc began to pose a serious threat to medium-term price stability. Any further appreciation would have amplified the deflation risk by, on the one hand, creating unfavourable conditions for exports and thereby exacerbating the recession, and, on the other, leading to a decline in import prices.
For this reason, the SNB decided in March to relax monetary conditions even further by substantially increasing the supply of liquidity. In addition to reducing the target range for the three-month Libor, it introduced exceptional instruments for this purpose, including currency swaps, repos with longer terms, purchases of Swiss franc bonds issued by domestic private sector borrowers and foreign exchange market interventions. It maintained this expansionary monetary policy course practically unchanged throughout the rest of 2009.