Monetary policy assessment of 14 December 2017
Central bank: snb | Type: statement | Date: 2017-12-14

Monetary policy assessment of 14 December 2017
aim of stabilising price developments and supporting economic activity. Interest on 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%. The SNB will remain active in the foreign
exchange market as necessary, while taking the overall currency situation into consideration.
Since the last monetary policy assessment, the Swiss franc has weakened further against the
euro and, more recently, has also depreciated against the US dollar. The overvaluation has
thus continued to decrease, yet the franc remains highly valued. The depreciation of the Swiss
franc reflects the fact that safe havens are currently less sought after. However, this
development is still fragile. Therefore, despite the easing of the situation, the negative interest
rate and the SNB’s willingness to intervene in the foreign exchange market as necessary
remain essential. These measures keep the attractiveness of Swiss franc investments low and
thus ease pressure on the currency. A renewed appreciation would still be a threat to price and
economic developments.
The new conditional inflation forecast for the coming quarters is higher than it was in
September. This is mainly due to increased oil prices and the further weakening of the Swiss
franc. The longer-term inflation forecast is virtually unchanged. For the current year, it has
risen marginally to 0.5%, from 0.4% in the previous quarter. For 2018, the SNB anticipates an
inflation rate of 0.7%, compared to 0.4% last quarter. For 2019, it continues to expect
inflation of 1.1%. The conditional inflation forecast is based on the assumption that the three-
month Libor remains at –0.75% over the entire forecast horizon.
The past few months have seen further improvements in the international environment. The
global economy exhibited strong, broad-based growth in the third quarter. The SNB expects it
Berne, 14 December 2017
Press release
to continue developing favourably in the quarters ahead. The growth forecasts for the euro
area and the US have been revised upwards slightly compared to the previous baseline
scenario. While the normalisation of monetary policy gradually continues in the US, monetary
policy in the euro area and Japan remains highly expansionary. In Switzerland, GDP grew in
the third quarter at an annualised 2.5%. Growth was primarily driven by manufacturing,
which benefited from dynamic economic developments abroad and the weaker Swiss franc. In
the wake of this development, capacity utilisation in the economy as a whole increased
further. The unemployment rate declined again slightly through to November.
Given the supportive global environment and favourable monetary conditions, the recovery in
the Swiss economy looks set to continue in the coming months. For 2018, the SNB expects
GDP growth of around 2%, compared to 1% in the current year.
Imbalances on the mortgage and real estate markets persist. While growth in mortgage
lending remained relatively low in 2017, residential property prices rose again slightly. In the
residential investment property segment, the strong price growth continued. 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.
Berne, 14 December 2017
Press release