Swiss National Bank

March 17, 2016

The latest quarterly review of Swiss monetary policy revises projected growth and inflation lower in both 2016 and 2017 but left policy settings unchanged.  Fourteen months have passed since a 1.2 franc per euro asymmetric barrier to franc appreciation was discontinued, but officials promise to remain “active” in the foreign exchange market to counter what it considers a significantly overvalued franc.  Besides intervention, the central bank employs a negative interest rate, with the sight deposit at -0.75% and the 3-month Libor target range at -0.25% to -1.25%.

On growth, GDP is projected to rise 1.4% in 2016 and 1.8% next year, each 0.1 percentage point lower than in the prior review.  The statement observes,

Economic momentum is not broad-based. Profit margins are still under pressure at many companies, and the willingness to invest and the demand for labour remain commensurately subdued. Consequently, the unemployment rate has risen again slightly in recent months. Since the SNB assumes a more modest pace of global economic growth, it is also expecting a slower recovery in Switzerland. For this year, it is anticipating GDP growth of between 1% and 1.5%, instead of around 1.5% as hitherto.

The projected rate of on-year decline in consumer prices was increased to 1.0% for the first half of this year, and the 12-month change in the CPI doesn’t turn positive until just after mid-2017.  CPI inflation averages 0.9% in 2018 and is projected to end that year at just 1.2%.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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