Switzerland Monetary Policy


Switzerland: Central Bank maintains minimum exchange rate and ultra-low interest rates

March 20, 2014

At its 20 March monetary policy meeting, the Swiss National Bank (SNB) decided to keep the three-month Libor target at the historically-low range of 0% to 0.25% that was established in August 2011. The Bank's decision matched market expectations. The SNB also reaffirmed its commitment to maintaining the 1.20 CHF per EUR cap, stating that the minimum exchange rate, “continues to be the right tool to avoid undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc.” Monetary authorities pointed out that the recovery in the global economy continued in the final quarter of 2013, but that “substantial risks” persist to the global growth outlook. Domestically, the Central Bank stated that GDP recorded soft growth in the fourth quarter of last year, mainly due to slower exports. However, the SNB pointed out that economic activity would pick up from the first quarter this year. Regarding price developments, the Bank recognized that no immediate upward pressures on inflation exist given low global commodity prices and a still strong exchange rate. The Bank concluded that the increase in the countercyclical capital buffer (CCB), which will start taking place as of 30 June, will result in a temporary rise in capital requirements for mortgage loans on residential property in Switzerland. This measure aims at increasing banks' resilience to a possible correction of imbalances in the mortgage and real estate markets. FocusEconomics Consensus Forecast panelists expect that the Swiss National Bank will stay put in both 2014 and 2015, with interest rates remaining unchanged at the current range of between 0% and 0.25%.

Author:, Senior Economist

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