Monetary policy assessment of 16 June 2016
Central bank: snb | Type: statement | Date: 2016-06-16

Monetary policy assessment of 16 June 2016
Monetary policy remains expansionary
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. 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. The SNB’s expansionary monetary policy is aimed at stabilising
price developments and supporting economic activity.
The new conditional inflation forecast suggests inflation will rise faster over the coming
quarters than the SNB predicted in March, principally due to the significant increase in oil
prices in the intervening period. The effect of this oil price rise on annual inflation vanishes
after the first quarter of 2017. The new conditional forecast subsequently moves closer to that
of the last quarter, and is in line with it from 2018. At –0.4%, the inflation forecast for 2016 is
0.4 percentage points higher than in March. For 2017, the SNB expects an inflation rate of
0.3%, compared to 0.1% forecast in the last quarter, while still anticipating a rate of 0.9% for
2018. The conditional inflation forecast is based on the assumption that the three-month Libor
remains at –0.75% over the entire forecast horizon.
The moderate recovery in the global economy continues. It is particularly well advanced in
the US, which is on the cusp of full employment. Economic growth in the euro area is
gradually becoming more broad-based. In China, growth remains robust thanks to economic
policy measures aimed at stimulating demand. Overall, international growth is principally
being driven by domestic demand. By contrast, international trade and global manufacturing
remain subdued. All in all, positive economic signals in recent months have helped ease the
situation on the international financial markets, which were dominated by turbulence at the
start of the year. Against a backdrop of rising confidence, commodity prices have also
Berne, 16 June 2016
Press release
recovered from their lows. The SNB expects the moderate growth in the global economy to
sustain over the coming quarters.
Nevertheless, significant risks remain for the global economy. Furthermore, the imminent UK
referendum on whether to stay in the European Union may cause uncertainty and turbulence
to increase.
In Switzerland, real GDP grew at an annualised rate of 0.4% in the first quarter. Available
indicators suggest that the recovery will be ongoing. The gradual improvement in the
international environment will also benefit Switzerland. Exports are likely to continue to
recover, and this should stimulate corporate investment and have a positive impact on the
labour market. The SNB expects the unemployment rate to stabilise in the second half of the
year. For 2016 as a whole, it still anticipates real GDP growth of between 1% and 1.5%.
Growth on the mortgage market once again slowed somewhat in the first quarter of 2016.
Real estate prices, by contrast, climbed at a marginally faster rate. Despite restrained
momentum in recent quarters, imbalances on the mortgage and real estate market increased
slightly due to comparatively weak growth in fundamentals. The SNB will continue to
monitor developments on the mortgage and real estate markets closely, and will regularly
reassess the need for an adjustment of the countercyclical capital buffer.
conditional inflation forecast of june 2016
Year-on-year change in Swiss consumer price index in percent
2013 2014 2015 2016 2017 2018 2019
Inflation Forecast June 2016,
with Libor at –0.75%
Forecast March 2016,
with Libor at –0.75%
Berne, 16 June 2016
Press release