Monetary policy assessment of 16 September 2010
Swiss National Bank maintains its expansionary monetary policy
The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. It is leaving the target range for the three-month Libor unchanged at 0.00–0.75%, and intends to keep the Libor within the lower part of the target range at around 0.25%.
The global economic recovery is continuing, albeit at a somewhat slower pace than the SNB had assumed at the time of the previous monetary policy assessment. Since mid-2009, the Swiss economy has developed more dynamically than previously expected. For 2010, the SNB expects real GDP to grow at a rate of approximately 2.5%. For the second half of the year, and in particular for 2011, however, the SNB now expects a marked slowdown in growth. This reflects the strong appreciation of the Swiss franc and the declining momentum of the global economy.
Uncertainty about the future outlook for the global economy remains high. Economic recovery is not yet sustainable. Downside risks predominate. Should they materialise and result in a renewed threat of deflation, the SNB would take the measures necessary to ensure price stability.
The SNB’s new conditional inflation forecast is lower than the June forecast, over the entire forecast horizon. Assuming an unchanged three-month Libor of 0.25%, average inflation for 2010 is expected to amount to 0.7%, for 2011 to 0.3% and for 2012 to 1.2%. The possibility that inflation will temporarily turn slightly negative at the beginning of 2011 cannot be ruled out. The inflation forecast indicates that the expansionary monetary policy is currently appropriate, although it poses long-term risks to price stability.