Monetary policy assessment of 18 September 2014
Central bank: snb | Type: statement | Date: 2014-09-18

Monetary policy assessment of 18 September 2014
euro and is leaving the target range for the three-month Libor unchanged at 0.0–0.25%.
The economic outlook has deteriorated considerably. The Swiss franc is still high. With the
three-month Libor close to zero, the minimum exchange rate remains the key instrument to
avoid an undesirable tightening of monetary conditions. The SNB will therefore continue to
enforce the minimum exchange rate with utmost determination. For this purpose, it is
prepared to purchase foreign currency in unlimited quantities. If necessary, it will take further
measures immediately.
The SNB’s conditional inflation forecast of September points to significantly lower
inflationary pressure in the medium term. In the first quarter of 2015, the inflation forecast
actually shows a slight increase in inflation, reflecting a base effect due to the rise in prices in
the previous quarter. However, from mid-2015 onwards, inflation is set to be lower. This is
mainly due to the deterioration in the global economic outlook and slower growth in
Switzerland. For the current year, the inflation forecast of 0.1% remains unchanged. The new
forecast for 2015 of 0.2% is 0.1 percentage points lower than at the last monetary policy
assessment, while the forecast for 2016 of 0.5% is even lower, namely by 0.4 percentage
points. For Switzerland, the risk of deflation has thus increased again. As in the previous
quarter, the forecast is based on a three-month Libor of 0.0% over the next three years, and
expects that the Swiss franc will weaken over the forecast horizon.
Since the monetary policy assessment in June, there has been a deterioration in the
international environment. Although the US economy rebounded in the second quarter
following a weather-related winter slump, the major euro area economies experienced
considerably weaker growth than expected, and inflation was again very low. In many of the
emerging economies, too, growth was lacklustre.
Zurich, 18 September 2014
Press release
The SNB expects that the global economic recovery will be weaker in the approaching
quarters than previously forecast. Economic developments in the US are still likely to drive
growth, while in the euro area, growth looks set to remain modest. Furthermore, the global
economic recovery remains vulnerable to setbacks. Geopolitical tensions could further weigh
on corporate and consumer confidence. The consolidation of public finances, the
implementation of reforms aimed at promoting growth and the completion of the assessment
of banks’ balance sheets still pose significant challenges for the euro area.
At an annualised rate of –0.2%, second-quarter GDP growth in Switzerland was distinctly
lower than forecast in June. Despite having expected a rate of around 2% in June, given the
current data, the SNB now puts this year’s growth rate at only just below 1.5%. Production
capacity will therefore remain underutilised for longer than previously assumed, and the
recovery on the labour market is also likely to be delayed.
In the second quarter, mortgage lending again recorded slightly weaker growth. However,
there is no evidence of a decline in the imbalances that have accumulated in recent years on
the Swiss mortgage and real estate markets. The SNB is monitoring the situation on these
markets closely, and regularly reassesses the need for an adjustment of the countercyclical
capital buffer.
Zurich, 18 September 2014
Press release