Switzerland: Central Bank leaves rates on hold and maintains minimum exchange rate
September 13, 2012
At its 13 September monetary policy meeting, the Swiss National Bank (SNB) left the three-month Libor target rate at the historically-low range of 0% to 0.25% established in August 2011, a decision that matched market expectations. The Central Bank also reasserted its commitment to maintain the CHF 1.20 per EUR cap established in September 2011, enforcing it "with the utmost determination" by buying foreign currency "in unlimited quantities for this purpose", as monetary officials acknowledged that the franc "is still high and is weighing on the Swiss economy". In their statement, monetary officials underlined that the Central Bank has lowered its inflation forecasts for this year on the back of unfavourable prospects for the global economy, a more pronounced underutilisation of production capacity, while adding that a depreciation of the currency has failed to materialise despite authorities' efforts to retain the exchange rate cap. Regarding developments in economic activity, the Bank underscored that GDP fell in the second quarter and unemployment increased. In addition, the SNB acknowledged that a bleaker global economic outlook and a recessionary trend in the Eurozone are likely to weigh on the economy going forward.