Swiss National Bank Revises Inflation Forecast Marginally Lower

March 15, 2012

The Swiss National Bank, which reviews policy in the final month of each calendar quarter, retained all of its goals.

  • It is keeping a zero-to-0.25% target range for 3-month Libor.  Such has lately hovered just below 0.10%. This range was first set in August 2011, replacing a range zero to 0.75% with a point target of 0.2% since March 2009.
  • A commitment to maintain exceptionally high money market liquidity.
  • A commitment to purchase whatever amount of foreign currency is needed to avert deflation Swiss franc appreciation was reaffirmed.
  • Through the liquidity pledge and by intervention if needed, officials will not let the franc strengthen beyond 1.2000 per euro.  That limit was first established last September 6th.

Today’s new statement from officials says Switzerland faces no inflation risk in the foreseeable future and repeats from December statement that even CHF 1.2000 is still high and so ought to weaken further.  Officials bumped up projected Swiss growth in 2012 to 1.0% from 0.5% forecast in December and indicate that financial market conditions have eased somewhat.  Nonetheless, the projected CPI glide path was lowered marginally.  From minus 1.0% on year in the current quarter, the new forecast shows diminishing year-on-year changes through the first quarter of next year.  Inflation is forecast at +0.3% in 2Q13 and 3Q13 and thereafter edges 0.1 percentage point higher each ensuing quarter of the forecast horizon until 0.8% in the year to 4Q14.

Unlike Japan and China, the Swiss foreign exchange policy aimed at contained franc strength continues to receive understanding support from other governments.

Copyright 2012.  Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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