Unchanged Swiss Monetary Policy but Higher Near-Term Inflation after Quarterly Policy Review

June 16, 2016

The Swiss sight deposit rate target was left at -0.75% and the 3-month Libor target corridor was kept at -1.25% to -0.25%.  Swiss National Bank authorities also said they”will remain active in the foreign exchange market, as necessary.”  Explaining these decisions in a released statement, officials go on to say

The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market are intended to make Swiss franc investments less attractive, thereby easing pressure on the currency. The Swiss franc is still significantly overvalued. The SNB’s expansionary monetary policy is aimed at stabilizing price developments and supporting economic activity.

The conditional projected path of CPI inflation, assuming unchanged monetary policy, was raised by0.5-0.6 percentage points (ppts) over the remainder of 2016, by a progressively lesser amount in the first three quarters of 2017, and then the same as before from 4Q17 until the end of the policy horizon.  On-year inflation doesn’t reach 1.0% until 2Q18.  The reason for the adjustment in the nearer term forecast is the higher level of imported energy costs since the March policy review.  Real GDP in Switzerland is forecast to expand between 1.0% and 1.5% in 2016.

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



Comments are closed.