SNB Decision a Non-Event as Policy Makers Pledge to Maintain CHF Minimum Rate

December 12, 2013 ( – The Swiss National Bank announced its quarterly monetary policy decision this morning with no deviation from the central bank’s commitment to defend the ceiling of 1.20 CHF per euro. Policy makers kept their economic growth outlook for 2013 unchanged, citing “unfavorable international environment and a strong Swiss franc” creating a challenging situation for the economy.

The following are excerpts from the speech of the SNB President Thomas Jordan during today’s press conference:

“… As you will have no doubt expected, the SNB is maintaining its minimum exchange rate of CHF 1.20 per euro. The Swiss franc is still high. With the three-month Libor already practic ally at zero, the minimum exchange rate continues to be the right tool for ensuring appropriate monetary conditions in Switzerland. If the Swiss franc were to appreciate, this would have significant consequences for the Swiss economy. On the one hand, an appreciation would lead to a further decline in import prices and a renewed threat of deflation.

In this regard, we should bear in mind that inflation in the last two years has been predominantly negative. On the other hand, with an ongoing unfavourable int ernational environment and a strong Swiss franc, the situation for our economy remains challenging.
Should it become necessary, we will therefore enforce the minimum exchange rate by buying foreign currency in unlimited quantities. And, if required, we will also take further measures. In addition, we are leaving the target range for the three-month Libor at 0.0–0.25%.
The SNB bases its monetary policy decision on a conditional inflation forecast, which assumes an unchanged three-month Libor of 0.0% over the next three years. You will find the relevant chart in your media kit. Compared to September, our forecast has been adjusted downwards slightly.
Reasons for this are the unexpectedly low rates of inflation for October and November, which serve as a lower departure point for the forecast, as well as the decline in inflation in the euro area and the slight fall in the oil price, which both help to dampen the inflation outlook. For 2013, we still anticipate inflation of –0.2%. For 2014 and 2015, the inflation forecast is down in each case by 0.1 percentage points and is now at 0.2% and 0.6% respectively. Consequently, no inflation risks can be identified for Switzerland in the foreseeable future”.

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