Switzerland Monetary Policy


Switzerland: Central Bank reaffirms minimum exchange rate

December 11, 2014

In its last scheduled monetary policy meeting of the year, the Swiss National Bank (SNB) decided to maintain interest rates at their lowest level on record and also reaffirmed its commitment to maintain the exchange rate cap it had imposed in September 2011. In a decision expected by the markets, on 11 December, Swiss monetary authorities left the three-month Libor target rate unchanged at the historically-low range of 0% to 0.25%. The SNB also repeated that it will continue to intervene in the foreign exchange market to prevent the Swiss franc from surpassing 1.20 CHF per EUR, pointing out that deflation risks have increased and that the Swiss currency is still high. Moreover, the Bank emphasized that, if required, it will take further measures immediately.

Commenting on the state of the global economy, monetary authorities recognized that developments are mixed. The economies of the United States, the United Kingdom and China showed robust growth in the third quarter, while the Eurozone and Japan deteriorated. The Bank still expects that the global economy will gradually gain momentum over the course of next year, while adding that the recent fall in oil prices will be “a contributory factor” to global economic growth. Regarding domestic economic developments, the Central Bank recognized that, following a weak second quarter, GDP was more robust than expected in the third quarter. However, for the following quarter the Central Bank expects another deceleration.

Regarding consumer prices, the Bank stated that the current sharp fall in oil prices is adding further pressure on inflation. In fact, the Bank sees that, within a context of low commodity prices—oil in particular—inflation in Switzerland will remain in negative territory in the coming four quarters. In the medium- and long-term, the Bank expects that low inflationary pressures will persist in Switzerland, reflecting low inflation across the globe and a weak economic outlook in the Eurozone.

FocusEconomics Consensus Forecast panelists expect that the Swiss National Bank will stay put in 2015, with interest rates remaining unchanged at the current range of between 0% and 0.25%.

Author:, Senior Economist

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Switzerland Monetary Policy Chart

Switzerland Monetary Policy December 2014

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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