Monetary policy assessment of 14 September 2017
Central bank: snb | Type: statement | Date: 2017-09-14

Monetary policy assessment of 14 September 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 against the euro and
appreciated against the dollar. Overall, this development is helping to reduce, to some extent,
the significant overvaluation of the currency. The Swiss franc nevertheless remains highly
valued, and the situation on the foreign exchange market is still fragile. The negative interest
rate and the SNB’s willingness to intervene in the foreign exchange market as necessary
therefore remain essential in order to reduce the attractiveness of Swiss franc investments and
thus ease pressure on the currency.
Owing to the exchange rate situation, the conditional inflation forecast has been revised
upwards slightly compared to June. For the current year, the forecast has risen marginally
to 0.4%, from 0.3% in the previous quarter. For 2018, too, the SNB anticipates an inflation
rate of 0.4%, compared to 0.3% last quarter. For 2019, it now expects inflation of 1.1%,
compared to 1.0% last 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 past few months have seen further improvements in the international environment. The
global economy exhibited strong, broad-based growth in the second quarter. In the advanced
economies, GDP continued to expand above potential, in some cases exceeding expectations.
One exception was the UK, where uncertainty over Brexit is weighing on growth. In the
emerging economies, too, economic activity was positive overall. In its baseline scenario, the
Zurich, 14 September 2017
Press release
SNB continues to anticipate favourable developments in the global economy for the quarters
Despite the improved situation in the real economy, inflation has so far remained modest in
most advanced economies. Against this backdrop, leading central banks are likely to maintain
their expansionary monetary policy and embark only gradually on a normalisation path.
The positive baseline scenario for the global economy continues to be subject to risks. In
particular, geopolitical factors and uncertainty regarding the future course of monetary policy
at leading central banks could cloud the outlook.
In Switzerland, an analysis of the available economic indicators suggests that the moderate
recovery is continuing. The Swiss economy is benefiting from the consolidation of global
economic activity. Renewed momentum in goods exports is supporting industrial activity.
Capacity utilisation is thus on the rise and companies are also becoming increasingly willing
to invest. The situation on the labour market is gradually improving.
The recovery is less evident in the quarterly GDP estimates. Owing to weak GDP momentum
in late 2016/early 2017, the current year is likely to see growth of just under 1.0%. At its
monetary policy assessment in June, the SNB was still expecting growth of roughly 1.5%.
The lower forecast is attributable to the weak GDP figures for the previous quarters.
Overall, imbalances on the mortgage and real estate markets persist. While growth in
mortgage lending remained relatively low in the second quarter, risks in the residential
investment property segment increased. In addition, following a period of stabilisation, prices
in the owner-occupied residential property segment rose again slightly. 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.
Zurich, 14 September 2017
Press release