Switzerland: Central Bank maintains the three-month Libor target range unchanged in September
September 17, 2015
At its 17 September meeting, the Swiss National Bank (SNB) decided to maintain the target range for the three-month Libor at between minus 1.25% and minus 0.25%, which was in line with market expectations. In addition, the interest rate on sight deposits with the SNB was also left unchanged at minus 0.75%. The SNB continues to see the negative interest rates as reasonable considering the appreciation of the currency and its impact on inflation and economic developments.
Regarding the domestic economy, monetary authorities commented that, in the second quarter, GDP recorded a slight increase after having declined in the first quarter. Q2’s weak growth was due to a deceleration in exports, which suffered from an appreciation of the Swiss franc as well as from a downturn in global trade. Looking forward, the Bank expects the economy to pick up speed in the second half of the year and it sees domestic demand as the main driver of growth. The SNB went on and added that, “if the international environment continues to improve and the overvaluation of the Swiss franc eases, exports should once again make a greater contribution to economic growth.”
Regarding consumer prices, the SNB stated that the annual variation in consumer prices will most likely move back into positive territory at the beginning of 2017. This increase will mainly reflect a gradual recovery in oil prices as well as a depreciation of the franc. As a result, the Bank revised up its inflation forecast for both this year and next. Now it expects consumer prices to drop 1.2% in 2015 and 0.5% in 2016.
Author: Dirina Mançellari, Senior Economist