Monetary policy assessment of 15 March 2012
Swiss National Bank keeps the minimum exchange rate
unchanged
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 for this purpose. The target range for the three-month Libor will
remain unchanged at 0.00–0.25%. The SNB will continue to maintain liquidity on the
money market at an exceptionally high level.
Even at the current rate, the Swiss franc is still high. In the foreseeable future, there is no
risk of inflation in Switzerland. Compared to December, the inflation forecast has even
fallen further. If developments in the international economy are worse than foreseen, or if
the Swiss franc does not weaken further, as expected, downside risks for price stability
could re-emerge. The SNB stands ready to take further measures at any time if the
economic outlook and the risk of deflation so require.
Developments in the global economy are mixed. While growth in the US was surprisingly
positive in the fourth quarter, GDP fell in the euro area and Japan. In Switzerland, growth
has slowed significantly over the course of the past year. Added value declined in the
fourth quarter in industries affected by exchange rate movements. While the high value of
the Swiss franc continues to present enormous challenges to the economy, the minimum
exchange rate is having an impact. It has reduced exchange rate volatility and given
business leaders a better basis for planning. There are growing indications that
Switzerland’s economy is stabilising. For 2012, the SNB is now forecasting moderate
growth, at close to 1%.
The situation on the financial markets has eased somewhat recently. Uncertainty remains
very high, however. It is unclear whether the advances in solving the European sovereign
debt crisis will succeed in defusing the situation permanently. Moreover, there is a risk
that geopolitical tensions will lead to a further rise in the price of oil. On the Swiss
mortgage and real estate market for residential property there are growing signs of
imbalances. Should these imbalances increase further, this could lead to considerable risks
to financial stability