Excerpts from the SNB Monetary Policy press release:
The Swiss National Bank (SNB) is maintaining its minimum exchange rate of CHF 1.20 per euro. The Swiss franc is still high. With a 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. The SNB will continue to enforce the minimum exchange rate with the utmost determination. If necessary, it is prepared to purchase foreign currency in unlimited quantities for this purpose, and to take further measures as required. In addition, it is leaving the target range for the three-month Libor unchanged at 0.0–0.25%.
The path of the SNB’s conditional inflation forecast of June points to lower inflationary pressure in the medium term. The inflation forecast for the coming quarters is actually slightly higher than in March, given the fact that inflation was somewhat higher in May than expected and the departure point for the forecast has moved upwards as a result. Nevertheless from mid-2015 onwards, inflation will be lower than forecast in the previous quarter. This is due to the modest global economic outlook and unexpectedly low inflation in the euro area. At 0.1%, the inflation forecast for the current year is 0.1 percentage points higher than in March. For 2015 and 2016, the new forecast – of 0.3% for 2015 and 0.9% for 2016 – is 0.1 percentage points lower, in each case, than at the previous monetary policy assessment. As in the previous quarter, the forecast is based on a three-month Libor of 0.0% for the next three years and expects that the Swiss franc will weaken over the forecast horizon. Consequently, there are no signs of any inflation risks in Switzerland in the foreseeable future.
As expected, growth in Switzerland picked up somewhat in the first quarter, after having been relatively weak in the previous quarter. Nevertheless, production capacities are still not fully utilized overall. The SNB expects the moderate recovery to continue in the coming quarters. For 2014, it again expects a growth rate of around 2.0%.
Starting 30 June 2014, higher capital requirements for mortgage loans financing residential property in Switzerland will apply as a result of the increased sectoral countercyclical capital buffer (CCB). Despite the slightly weaker momentum on the mortgage and real estate markets, there is no evidence of any sustainable easing. The SNB is monitoring the situation on the mortgage and real estate markets closely, and regularly reassesses the need for an adjustment of the CCB.