Monetary policy assessment of 19 March 2015
Central bank: snb | Type: statement | Date: 2015-03-19

Monetary policy assessment of 19 March 2015
unchanged at between –1.25% and−0.25%. The interest rate on sight deposits with the SNB
remains at –0.75% and the exemption thresholds remain unchanged. Negative interest helps to
make it less attractive to hold investments in Swiss francs. Overall, the Swiss franc is
significantly overvalued and should continue to weaken over time. The SNB will continue to
take account of the exchange rate situation, and its impact on inflation and economic
developments, in formulating its monetary policy. It will therefore remain active in the
foreign exchange market, as necessary, in order to influence monetary conditions.
The SNB’s conditional inflation forecast has been adjusted substantially downwards
compared to the December forecast. Together with the sharp fall in oil prices, the appreciation
of the Swiss franc since the minimum exchange rate was discontinued moves inflation further
into negative territory for a short period. For 2015, the SNB has revised its inflation forecast
downwards by 1% percentage point to −1.1%. Inflation reaches its low point in the third
quarter of 2015, at –1.2%. Thereafter, forecast inflation rises more rapidly than in the
December forecast, due to the interest rate reductions since the last monetary policy
assessment. Nevertheless, in 2016, inflation will amount to –0.5%, which is 0.8 percentage
points lower than in the December forecast. Not until 2017 will inflation move into positive
territory again, at 0.4%. The conditional forecast assumes that the three-month Libor remains
at –0.75% over the entire forecast horizon, and that the Swiss franc weakens.
The global economic recovery is continuing. In the fourth quarter of 2014, growth in the US
remained above potential. The favourable momentum of the economy there is also reflected in
the sound growth in employment. The economy picked up somewhat in the euro area. This
was primarily due to strong quarterly growth in Germany. In Japan, too, demand increased.
Consumer price inflation edged down worldwide due to lower oil prices. In many advanced
economies, inflation moved into negative territory at the beginning of 2015.
Zurich, 19 March 2015
Press release
During the course of the year, the growth of the global economy is likely to firm gradually.
Several factors are supporting this growth. First, the significant decline in oil prices is helping
to increase demand. Second, monetary policy in the advanced economies remains very
expansionary. The euro area, in particular, is likely to benefit from the further decline in
interest rates as well as the marked depreciation of the euro. Recently, an easing in European
banks’ lending conditions, which were very restrictive, has also been observed.
Despite these favourable developments, the outlook for the global economy is still uncertain.
Overall, substantial risks remain, with the focus on issues relating to the economic outlook for
Greece and the Ukraine conflict.
In the fourth quarter, the Swiss economy again grew faster than expected. On the output side,
growth was relatively broad-based, with manufacturing being the main driver. Value added
also rose significantly in the banking industry and the public sector. On the demand side, both
consumption and equipment investment recorded favourable developments. By contrast,
exports of goods and services stagnated.
In December, the SNB expected annual growth of some 2% for 2015. With the appreciation
of the Swiss franc since mid-January, this forecast has had to be revised. A noticeable
weakening in the economy may be expected, particularly in the first half of the year. For the
year as a whole, the SNB now only expects real GDP to increase by just under 1%. Given this
weakening, appreciable underutilisation of production capacity may be expected in the short
term. Unemployment is likely to increase moderately. The anticipated strengthening in the
global recovery will have a supportive effect.
Mortgage lending growth weakened further in the fourth quarter. Meanwhile, growth in real
estate prices remained more or less unchanged. Overall, the imbalances that have built up on
these markets in recent years are still just as high as before. The SNB is monitoring the
situation closely, and regularly assesses the need for an adjustment of the countercyclical
capital buffer.
Zurich, 19 March 2015
Press release