Swiss National Bank’s Quarterly Monetary Policy Review

June 20, 2013

It’s been almost two years since the 3-month Libor target point and range were cut in August 2011 to zero and 0.0-0.25% and authorities imposed a cap on franc strength versus the euro of 1.2000 on September 6, 2011.  Today’s quarterly policy review reaffirmed those guidelines and made minuscule changes in its economic outlook.  Real GDP growth is expected to be much slower in the second quarter than 1Q and to expand no faster than 1.5% in 2013 as a whole.  From on-year projected CPI deflation of 0.5% in the present second quarter of 2013, the 12-month change of creeps upward at a snail’s pace and doesn’t reach even 1.0% until the first quarter of 2016 — all this only if the ultra-low interest rate target and franc cap are maintained. 

Regarding policy to limit franc appreciation, the statement has this to say.

The Swiss franc is still high. An appreciation of the Swiss franc would compromise price stability and would have serious consequences for the Swiss economy. In the current environment, the minimum exchange rate remains important in order to avoid an undesirable tightening of monetary conditions for Switzerland in the event of sudden upward pressure on the Swiss franc. The SNB stands ready to enforce the minimum exchange rate, if necessary, by buying foreign currency in unlimited quantities, and to take further measures, as required.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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