Monetary policy assessment of 15 December 2016
Central bank: snb | Type: statement | Date: 2016-12-15

Monetary policy assessment of 15 December 2016
sight deposits at the SNB is to remain at –0.75% and the target range for the three-month
Libor is unchanged at between –1.25% and –0.25%. At the same time, the SNB will remain
active in the foreign exchange market as necessary, while taking the overall currency situation
into consideration. The SNB’s expansionary monetary policy is aimed at stabilising price
developments and supporting economic activity. The negative interest rate and the SNB’s
willingness to intervene in the foreign exchange market are intended to make Swiss franc
investments less attractive, thereby easing pressure on the currency. The Swiss franc is still
significantly overvalued.
Compared to September, the new conditional inflation forecast has been revised slightly
downwards in the short term. This mainly reflects the fact that inflation in October and
November was slightly lower than expected. The SNB nevertheless anticipates an unchanged
inflation rate of –0.4% for 2016. For 2017, however, the forecast is down to 0.1%, from 0.2%
in the previous quarter. For 2018, the SNB now expects inflation of 0.5%, compared to 0.6%
in the third quarter. The conditional inflation forecast is based on the assumption that the
three-month Libor remains at –0.75% over the entire forecast horizon.
The global economy has continued to recover in line with the SNB’s expectations. In the US,
third-quarter GDP growth was again significantly above potential. Furthermore, the situation
on the labour market continued to improve. The other major economic areas also recorded
favourable economic activity in the third quarter. The euro area and Japan continued to
register moderate growth, while in China, growth remained strong thanks to a variety of fiscal
measures. In the UK, the economic impact of the Brexit decision has so far proved less
pronounced than originally feared.
Berne, 15 December 2016
Press release
The SNB expects the moderate pace of global growth to continue in 2017. The baseline
scenario for the world economy is still subject to considerable risks, however. Structural
problems in a number of advanced economies could negatively affect the outlook. Added to
this are a multitude of political uncertainties which are particularly associated with the future
course of economic policy in the US, upcoming elections in several countries in the euro area
as well as the complex and arduous exit negotiations between the UK and the EU.
According to an initial quarterly estimate, GDP in Switzerland grew at an annualised rate of
0.2% in the third quarter. This small increase must also be seen in the context of high growth
in the second quarter. Year-on-year, GDP rose by 1.3% in the third quarter. Overall, economic
indicators point to a continuation of the moderate economic recovery in Switzerland and are
thus consistent with our previous GDP growth forecast of around 1.5% for 2016 as a whole.
Developments on the labour market support this view. Up until November, the seasonally
adjusted unemployment rate for this year was stable at 3.3%. Survey-based labour demand
indicators have recovered further.
The outlook for the coming ye ar is cautiously optimistic. As for 2 016, the SNB expects
GDP growth for 2017 to be roug hly 1.5%. Prevailing internationa l risks mean that forecasts,
including Switzerland’s, continue to be fraught with considerable uncertainties.
Over the last six months, growth on the mortgage and real estate markets has remained fairly
constant at a relatively low level. At the same time, imbalances on these markets have
decreased slightly overall due to developments in fundamentals. However, imbalances are still
at a similarly high level as in 2014, when the sectoral countercyclical capital buffer was set at
2%. The SNB will continue to monitor developments on these markets closely, and will
regularly reassess the need for an adjustment of the countercyclical capital buffer.
conditional inflation forecast of december 2016
Year-on-year change in Swiss consumer price index in percent
2013 2014 2015 2016 2017 2018 2019
Inflation Forecast December 2016,
with Libor at –0.75%
Forecast September 2016,
with Libor at –0.75%
Berne, 15 December 2016
Press release