The launch of the euro has radically altered Switzerland's monetary environment. The new currency will play an increasingly important role in the European economy. In three years the euro may even be used ever more widely in Swiss border and tourist areas.

As the single currency gains in significance, the Swiss franc/euro exchange rate will become a major factor for the development of the Swiss economy, and therefore also for the monetary policy of the Swiss National Bank.

Despite imponderables, the high degree of economic convergence between Switzerland and Euroland is expected to ensure a natural stability between the Swiss franc and the euro. In this respect the experience of the past three months is extremely encouraging. It would, however, be premature to conclude that Switzerland should peg its currency to the euro. Such a step would lead to a marked rise in the Swiss interest rate level - which is approximately 1.5 percentage points lower than in Euroland - and this would have an adverse effect on the Swiss economy. In any case, it may be assumed that in the years ahead the interest differential will narrow in line with the financial markets' confidence in the new European currency.