Switzerland Monetary Policy


Central Bank keeps rates unchanged and affirms minimum exchange rate

At its 14 march monetary policy meeting, the Central Bank left the three-month Libor target rate at the historically-low range of 0% to 0.25% established in August 2011, in a decision widely expected by the market. The Swiss National Bank (SNB) also reiterated its intention to enforce the 1.20 CHF per EUR cap established in September 2011, "with the utmost determination" adding that "if necessary, is prepared to buy foreign currency in unlimited quantities for this purpose".

In its accompanying statement, the Central Bank underlined that, in the final quarter of 2012, inflation was lower than expected as a strong Swiss franc continued to exert downward pressures on consumer prices. In addition, the Bank argued that "downside risks to the Swiss economy remain considerable" and that "there is a risk that tensions in the Euro area will increase again".

On the financial stability front, the SNB stated that the countercyclical capital buffer (CCB) had been activated on 13 February, requiring banks to provide more capital backing for residential mortgage loans in Switzerland. The Central Bank introduced the CCB in July 2012 in order to strengthen the resilience of banks, as ultra-low interest rates are likely to fuel imbalances, especially in the real state market.

FocusEconomics Consensus Forecast panellists expect that the Swiss National Bank will stay put in both 2013 and 2014, with interest rates remaining unchanged at the current range of between 0% to 0.25%.

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