Monetary policy decisions for the 2nd quarter 2000
Central bank: snb | Type: statement | Date: 2000-03-23

Press Relations
P.O. Box, CH-8022 Zurich
Telephone +41 1 631 31 11
Telefax +41 1 631 39 10
Zurich, 23 March 2000
Press release
Monetary policy decisions for the 2nd quarter 2000
Further tightening of monetary policy - increase in target range for the three-month Libor rate from 1.75%-2.75% to
the three-month Libor rate from 1.75%-2.75% to 2.5% -3.5%. This step is in response to the growing inflationary dangers
emanating from accelerating economic activity and the development of the exchange rate. The National Bank is aiming at the
middle of the target range.
The National Bank had last increased the target range for the three-month Libor rate on 3 February, by a half percentage
point to 1.75%-2.75%. Data released after this interest rate adjustment shows that the Swiss economy had gained enormous
momentum in the second half of 1999. This unexpectedly strong acceleration in growth was accompanied by a distinct rise in
employment and a further decline in unemployment. The vigorous growth is broadly based. On the domestic front, private
consumption and notably construction demand picked up. The chief stimuli, however, emanated from exports, which benefited
from the international economic upswing and the falling export-weighted exchange rate.
Leading indicators show that the growth of real gross domestic product of close to 2% forecast by the National Bank at the
end of 1999 will be clearly surpassed in the current year. The industrial and construction sectors witnessed a marked
expansion in both incoming orders and orders on hand. Consumer sentiment is excellent, and there are increasing signs of
the labour market tightening. Moreover, inflationary stimuli from abroad are becoming discernible. On the one hand, the
decline in the export-weighted exchange rate increases the price of imported goods and, on the other, production costs are
rising in the wake of higher raw material prices.
Given the dynamic economic development and the continued weak trend of the Swiss franc vis-à-vis the dollar the inflationary
risks have grown significantly. If the National Bank left the interest rates unchanged, inflation measured by consumer prices
could climb to over 2% in the medium term. By raising the target range for the three-month Libor rate by ¾ percentage points
this danger is to be counteracted.