Swiss National Bank keeps monetary policy unchanged, expects economy to grow between 2.5-3 pct in 2018

The Swiss National Bank maintained its expansionary monetary policy today, thereby steadying price developments and underpinning economic activity. The interest rate on sight deposits was kept unchanged at -0.75 percent, while the target range for the three-month Libor was maintained at between -1.25 percent and 0.25 percent.

The statement mentioned that the Swiss National Bank will continue to be active in the foreign exchange market as necessary, while taking the overall currency situation into consideration. Since the monetary policy assessment of June 2018, the Swiss franc has strengthened markedly against the major currencies and also against emerging market currencies. The Swiss franc is highly valued, and the situation on the foreign exchange market remains delicate.

The negative interest rate and the central bank’s readiness to intervene in the foreign exchange market as necessary remain essential in order to keep the attractiveness of Swiss franc investments low and thus ease pressure on the currency.

The SNB’s new conditional inflation forecast implies that inflation will be higher up to the start of 2019 as compared to the prediction made in June. This is because of a slight acceleration in domestic inflation. From the second quarter of 2019, the new conditional forecast lies below the June forecast due to the appreciation in the Swiss franc.

The SNB continues to expect inflation of 0.9 percent for this year, while the inflation forecast of 0.8 percent for next year. The central bank expects inflation to reach 1.2 percent in 2020. The conditional inflation forecast is based on the assumption that the three-month Libor continues to be at -0.75 percent over the entire forecast horizon.

The SNB, in its statement said that Swiss economic outlook continues to be favourable, based on leading indicators. However, momentum is likely to reduce slightly, owing to a slight deceleration in global growth and the waning effect of recent appreciation of the Swiss franc. The central bank expects the economy to expand between 2.5 percent and 3 percent for the current year and a further slight decline in unemployment. The stronger projection of economic growth is linked to the upward revision for the previous quarters.

The central bank has stated that it will continue to keep a close watch on developments in the mortgage and real estate markets and will regularly reassess the requirement for an adjustment of the countercyclical capital buffer.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Swiss Franc was neutral at -21.5265, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -125.542. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex