Swiss National Bank: Review Identifies a Considerable Deterioration of the Economic Outlook

September 18, 2014

The quarterly monetary policy review

  • Revised projected 2014 growth to “slightly less than 1.5% from 2.0%, noting negative annualized growth of minus 0.2% last quarter.
  • Opined that global recovery in coming quarters will be weaker than forecast previously and remains vulnerable to setbacks.
  • Called the Swiss franc “still high” but did not change the 1.2000 franc per euro ceiling that was imposed initially in September 2011.
  • Left the target range for 3-month Swiss Libor at 0.0-0.25%.  Such has in fact been pinned at the bottom of the range for some time.
  • With no room to cut interest rates, exchange rate policy enforced with unlimited intervention remains the cutting edge tool of policy.
  • Revised projected inflation lower from the second quarter of 2015 onwards.  Consumer prices are forecast to rise 0.1% this year, 0.2% next year and 0.5% in 2016 (down from a projection of 0.9% made in June).  CPI inflation doesn’t rise to 1% until the second quarter of 2017.  What drives these revisions is capacity staying underutilized for longer than assumed previously and the labor market taking longer to recover as well.

In 2014, EUR/CHF has been 1.2183 on average (very close to the 1.2187 mean since the exchange rate cap was imposed) and has ranged between 1.2394 and 1.2045.  The Swissie cross is quoted presently at 1.2070, very near to its most expensive euro level of the year.

The Swiss National Bank reviews monetary policy on a quarterly basis.  The December review will be reported on the 11th of that month.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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