Switzerland Monetary Policy


Switzerland: Central Bank maintains three-month Libor target range unchanged in December

December 10, 2015

At its 10 December 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. The Bank also reiterated that it will continue to intervene in the foreign exchange market in order to support the currency.

Regarding the domestic economy, monetary authorities commented that growth in the third quarter came in below expectations broadly due to weaker manufacturing activity and sluggish world trade. On the contrary, the services sector performed well in Q3 and this encouraging performance came on the back of robust domestic demand. The SNB went on to add that, “the gradual improvement of the global economy is likely to further strengthen foreign demand for Swiss goods and services. Domestic demand also looks set to remain robust.” The Bank forecasts economic growth of 1.5% in 2016.

The SNB stated that the annual drop? in consumer prices bottomed out in the third quarter and that inflation is expected to pick up slightly in the short term. Regarding the medium term, the Bank commented that it projects a lower level of inflation compared to what it had predicted at its September’s meeting. The revision comes on the back of a slight deterioration in the outlook for the global economy. The SNB projects consumer prices to drop 0.5% in 2016 before recovering and increasing 0.3% in 2017.

FocusEconomics Consensus Forecast panelists expect that the Swiss National Bank will stay put in 2016, with interest rates remaining unchanged at the current range of between minus 1.25% and minus 0.25%.

Author:, Senior Economist

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Switzerland Monetary Policy Chart

Switzerland Monetary Policy December 2015

Note: 3-month Swiss Franc LIBOR target in %. Current rate is set to a range of between 0% and 0.25%.
Source: Swiss National Bank (SNB).

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