Swiss National Bank

June 14, 2012

The Swiss National Bank (SNB) will maintain the minimum exchange rate of CHF 1.20 per euro and will enforce it with the utmost determination. It remains prepared to buy foreign currency in unlimited quantities for this purpose. Even at the current rate, the Swiss franc is still high. Another appreciation would have a serious impact on both prices and the economy in Switzerland. The SNB will not tolerate this. If necessary, it stands ready to take further measures at any time.

At their quarterly policy review, Swiss monetary officials agreed to continue subordinating domestic monetary policy to an exchange rate objective summarized above in the opening paragraph of their released statement.  Inflation is projected to decline 0.5% in 2012 and then rise 0.5% next year and 0.6% in 2014.  The projected path on sequential on-year CPI increases is very similar to the predicted trajectory in the March review, and it is moreover contingent upon an assumed depreciation of the franc.  Otherwise, inflation will be even lower than indicated.  Slower economic growth from 2Q12 is assumed in the baseline forecast.  The target range for 3-month Swiss Libor continues to be zero to 0.25%.  Officials cut the range to 0-0.25% last August 3rd and at that time assigned a point target of zero.  The franc/euro ceiling was announced a month later on September 6, 2011.

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



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