Quarterly Swiss Monetary Policy Review

September 15, 2016

Officials at the Swiss National Bank left their policy interest rate unchanged and retained a supportive readiness to intervene as needed to counter excessive strength in the franc. The sight deposit rate stays at -0.75%, and the target range for three-month Swiss Libor is centered on that level and a percentage point wide. The exchange rate component of the policy had been automatically enforced for a couple of years but the former franc per euro ceiling of 1.2000 was discontinued in mid-January 2015. Today’s released statement has this to say about the franc, which is currently trading at 1.094 per euro.

The SNB will remain active in the foreign exchange market, as necessary. 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 upward pressure on the currency. The Swiss franc is still significantly overvalued. The SNB’s expansionary monetary policy is aimed at stabilising price developments and supporting economic activity.

The latest policy review revised projected 2016 Swiss GDP growth to 1.5% from a range of 1.0-1.5% predicted earlier. Even so, projected inflation was trimmed by 0.1 percentage point (ppt) to 0.2% in 2017 and by 0.3 ppts to 0.6% in 2018. Inflation is not expected to touch 1.0% until the first quarter of 2019, 2-1/2 years away.

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



Comments are closed.