Switzerland Leaves Monetary Policy Unchanged


The Swiss National Bank maintained its minimum exchange rate of CHF 1.20 per euro and left the target range for the three-month Libor unchanged at 0.0–0.25 percent, saying deflation risks have increased and the Swiss franc is still high. The central bank warned it is prepared to buy foreign currency in unlimited quantities to enforce the minimum exchange rate.

Excerpts from the SNB Monetary Policy press release:

The Swiss National Bank is maintaining its minimum exchange rate of CHF 1.20 per euro, and is leaving the target range for the three-month Libor unchanged at 0.0–0.25%. Deflation risks have increased once again and the Swiss franc is still high. Consequently, the SNB will continue to enforce the minimum exchange rate with the utmost determination. It is prepared to buy foreign currency in unlimited quantities for this purpose. With the three-month Libor at zero, the minimum exchange rate is the key instrument to avoid an undesirable tightening of monetary conditions. If required, the SNB will take further measures immediately. 

The SNB has once again adjusted its conditional inflation forecast downwards compared to the previous quarter. Above all, the appreciably lower oil price will push inflation into negative territory during the next four quarters. Over the medium to long term, persistently low inflation across the globe and the even weaker outlook for the euro area economy will dampen inflation in Switzerland. For 2014, the SNB has revised its inflation forecast downwards by 0.1 percentage points to 0.0%.
For 2015, forecast inflation will even turn negative, at –0.1%. Only in 2016 is inflation expected to rise slightly, to 0.3%. This constitutes a downward adjustment of 0.3 percentage points for 2015, and 0.2 percentage points for 2016. These forecasts assume that the three-month Libor will remain at zero over the entire forecast horizon, and that the Swiss franc will weaken.

Following a weak second quarter, real GDP growth in Switzerland was unexpectedly favorable in the third. However, the underlying economic momentum has not changed. For next year, the SNB still expects to see GDP growth of about 2 percent. Thus, the underutilization of economic capacity should decline only gradually.

SNB | Joana Taborda | joana.taborda@tradingeconomics.com
12/11/2014 9:33:50 AM