Switzerland has long prided itself as an island of financial stability. During the economic turmoil of the past year, that reputation has appeared under threat with Credit Suisse (NYSE: CS - News) and especially UBS (NYSE: UBS - News) suffering heavy writedowns on their exposures to risky US credit.

But when it comes to the Swiss real economy, the story has remained one of solidity, argues Jean-Pierre Roth, chairman of the Swiss National Bank. The central bank's objective over the past year has been to "isolate Switzerland from the impact of financial turbulence," he said in an interview with the Financial Times. "Credit conditions . . . have not deteriorated."

That has probably got a good deal to do with the way the SNB implements its monetary policy. Like the European Central Bank, its focus is on combating inflation. But while the ECB seeks to target overnight interest rates, the Swiss central bank focuses on three-month market interest rates, which Mr Roth points out have been "at the centre of the turbulence". In practice this has meant lowering, for instance, one-week interest rates with a view to bringing the three-month rate back into line - in effect, loosening monetary policy.

It might still be hard to believe, given the stream of bad news about Swiss banks, that credit conditions have remained unaffected. "But we have not had any reports of a major deterioration," Mr Roth says. "All the cantonal banks, the regional banks, are doing fine. Long-term interest rates on the bond market are about 3 per cent all the time, and the money market has stabilised. So we do not have a feeling of major deterioration."

Mr Roth is too diplomatic to offer an opinion on whether other central banks should also focus on targeting three-month interest rates. For the ECB, responsible for a much larger economy, the size of operations required might not be technically feasible.

Another feature of the SNB's operations that has caught the eye of outsiders is the infrequency of its policy meetings - held just four times a year. Again, Mr Roth stops short of suggesting others should follow the example. But he hints such a system helps prevent central bank activism, as it "forces you not to be hyperactive".

Where he is more outspoken is on the Swiss economy's prospects. The country has not escaped a slowdown - and the difficulties in the banking sector have taken their toll. However, economic growth hit 3.1 per cent last year, helped by the flexibility the country has gained by opening its labour markets to workers from European Union countries after the tough restrictions of the past.

Even this year, "we probably will have better economic growth than most of our neighbours because we still have very strong domestic demand. . . We still have a very stable labour market - almost full employment," he says. Recent surveys show domestic confidence remains high, in spite of the knocks to the important financial services sector, thanks to still robust export demand.

That resilience is largely because Switzerland "is more globalised than the European economies, so we still benefit a lot from the dynamics of Asia", says Mr Roth.

His optimism is borne out by anecdotal evidence - for instance the continuing buoyancy of the Swiss luxury goods sector, including unprecedented growth rates for the watch industry. "Not everybody is suffering a lot," he says. "There are people gaining because of the oil price increase - and perhaps they need more watches!"