SNB Monetary policy assessment of 15 September 2011
With these measures, the SNB is taking a stand against the acute threat to the Swiss economy and the risk of deflationary development that spring from massive overvaluation of the Swiss franc. Even at a rate of CHF 1.20, the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflation risks so require, the SNB will take further measures.
The growth of the global economy has slowed substantially in the course of the second quarter. The outlook for the advanced economies, in particular, has worsened considerably. In Switzerland, economic activity is suffering from both the strong Swiss franc and the softening in international demand. The SNB expects growth to come to a halt in the second half of the year. For 2011 as a whole, GDP growth can be expected at 1.5–2.0%. This is only because of the favourable economic development in the first half of the year. Without the stabilising effect of the minimum exchange rate, there would be a substantial threat of recession.
Uncertainty about the future outlook for the global economy remains exceptionally high and the risks for the global financial system have increased substantially. The deterioration in the outlook for growth and fiscal problems in the advanced economies are both adversely impacting confidence in financial markets worldwide.
The SNB’s conditional inflation forecast has shifted substantially downwards as a result of the massive appreciation in the Swiss franc and the deterioration in the outlook for the global economy. For 2011, the forecast shows an inflation rate of 0.4%, for 2012 a rate of –0.3% and for 2013 a rate of 0.5%. This forecast is based on the assumption of a three-month Libor of 0.0% and a further weakening in the Swiss franc. In the foreseeable future, there is no risk of inflation in Switzerland. There are, however, downside risks for price stability should the Swiss franc not weaken further.