Monetary policy assessment of 15 December 2011
Swiss National Bank reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro
The Swiss National Bank (SNB) will continue to enforce the minimum exchange rate of CHF 1.20 per euro with the utmost determination. It is prepared to buy foreign currency in unlimited quantities. The target range for the Libor remains at 0.0–0.25%, and the SNB continues to aim for a three-month Libor close to zero. Even at the current rate, the Swiss franc is still high and should continue to weaken over time. The SNB stands ready to take further measures at any time if the economic outlook and the risk of deflation so require.
In the third quarter, the global economy picked up again slightly, thanks to positive stimuli from Japan, the US and China. Growth in Europe, however, remained weak and the economic outlook for the euro area deteriorated. In Switzerland, the pace of growth slowed considerably in the third quarter. The substantial appreciation of the Swiss franc over the summer is weighing heavily on the Swiss economy. For 2011 as a whole, real GDP growth of 1.5–2.0% can be expected. This is only because of the favourable economic development in the first half of the year. For 2012, the SNB is expecting economic growth in the order of 0.5%.
The international outlook continues to be highly uncertain. A further escalation of the European sovereign debt crisis cannot be ruled out. This would have grave consequences for the international financial system. Moreover, given our country’s close relations with the euro area, Switzerland’s economic prospects are highly dependent on how the crisis develops.
Compared to the previous quarter, the SNB’s conditional inflation forecast has once again been adjusted downwards. In the short term, inflation will dip into negative territory sooner, owing to the effects of the earlier currency appreciation, which have been stronger than expected. In the longer term, the worsening of the growth outlook for the euro area is dampening inflation. The forecast for 2011 shows an inflation rate of 0.2%. For 2012, the SNB is expecting inflation of –0.3% and for 2013, of 0.4%. These forecasts are based on the assumption of a three-month Libor of 0% and a depreciating Swiss franc. In the foreseeable future, there is no risk of inflation in Switzerland. If foreign demand were to fall off more sharply than expected, downside risks to price stability would emerge.