Excerpt from the Swiss Bank Monetary Policy Committee statement:
The SNB stands ready to enforce the minimum exchange rate, if necessary, by buying foreign currency in unlimited quantities, and to take further measures as required. With the three-month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc.
In March, the SNB’s conditional inflation forecast was adjusted downwards once again. Inflation in Switzerland was close to 0 percent for January and February. Internationally declining inflation rates and the slightly stronger Swiss franc are delaying the rise of inflation into positive territory.
As in the previous quarter, the forecast is based on a three-month Libor of 0.0% over the next three years and assumes that the Swiss franc will weaken over the forecast period. The SNB is now expecting the inflation rate to be 0.2 percentage points lower for both 2014 and 2015, at 0% and 0.4% respectively. In 2016, inflation should increase to 1.0%.
The moderate recovery of the global economy continued in the fourth quarter. In Europe, growth was, geographically, broader-based than in previous quarters. By contrast, euro area inflation was low, in part reflecting the persistent weakness of demand within the euro area.
In Switzerland, as expected, the fourth quarter of 2013 saw a weakening of growth momentum, largely as a result of a decline in exports, which led to a corresponding decrease in value added in the manufacturing industry. Economic activity should pick up again from the first quarter of 2014. For 2014 as a whole, the SNB is still anticipating GDP growth of around 2 percent.