News conference
Zurich, 17 December 2020
Thomas Jordan
Introductory remarks by Thomas Jordan
Ladies and gentlemen
It is my pleasure to welcome you to the Swiss National Bank's news conference. Owing to
the coronavirus pandemic, we can unfortunately only meet virtually today. The pandemic is
placing a very heavy burden on people across the world, and Switzerland is no different. Our
sympathies go in particular to those who have fallen ill themselves or who have lost relatives
and friends.
In my remarks, I will begin by explaining our monetary policy decision and our assessment of
the economic situation. I will then discuss the topic of climate change and the SNB. Fritz
Zurbrügg will report on developments in the area of financial stability and the impact of the
pandemic on the demand for banknotes. Andréa Maechler will then comment on the situation
on the financial markets and will look at the upcoming replacement of the CHF Libor with
SARON. We will - as ever - be pleased to take your questions afterwards.
Monetary policy decision
The coronavirus pandemic is continuing to have a strong adverse effect on the economy.
Against this difficult backdrop, we are maintaining our expansionary monetary policy with a
view to stabilising economic activity and price developments.
We are keeping the SNB policy rate and interest on sight deposits at the SNB at -0.75%. In
light of the highly valued Swiss franc, we remain willing to intervene more strongly in the
foreign exchange market. In so doing, we take the overall exchange rate situation into
consideration. Furthermore, we are supplying generous amounts of liquidity to the banking
system via the SNB COVID-19 refinancing facility (CRF). The SNB's expansionary
monetary policy provides favourable financing conditions, counters upward pressure on the
Swiss franc, and contributes to an appropriate supply of credit and liquidity to the economy.
In the current situation, the inflation outlook remains subject to high uncertainty. The new
conditional inflation forecast through to the end of 2021 is slightly lower than in September.
This is primarily due to the renewed deterioration in the economic situation as a result of the
second wave of the pandemic. In the longer term, the inflation forecast is unchanged from
September. The forecast for 2020 is negative (-0.7%). The inflation rate is likely to be higher
again next year (0.0%) and slightly positive in 2022 (0.2%). The conditional inflation forecast
is based on the assumption that the SNB policy rate remains at -0.75% over the entire
forecast horizon. The long-term inflation expectations are well anchored and stand at around
1%.
Global economic outlook
The coronavirus pandemic and the measures implemented to contain it led to a historic
downturn in the global economy in the first half of 2020. With the decline in new infections
and the easing of the containment measures in the summer months, economic activity
increasingly resumed. This resulted in the global economy posting a strong recovery in the
third quarter. Nevertheless, GDP remained significantly below pre-crisis levels in most
countries.
Infection numbers have unfortunately risen again rapidly in Europe and the US since October.
In response to this, numerous containment measures have once more been adopted, and the
population has become more cautious again when it comes to activities with a higher risk of
infection. Recent indicators show that this is once more having a detrimental impact on
economic activity. In various countries, this could even result in GDP shrinking in the fourth
quarter. However, the effects can be expected to be smaller than in spring given that many
countries have opted for less severe containment measures.
In our baseline scenario for the global economy, we anticipate that the pandemic will be
brought back under control in the foreseeable future, and that appropriate measures will
prevent further waves of infection. The economic recovery should therefore regain
momentum in the course of next year. The monetary and fiscal policy measures adopted
worldwide are providing important support in this regard. However, it is likely that global
production capacity will be underutilised for some time to come and inflation will remain
modest in most countries.
This scenario is subject to a high level of uncertainty, and there are risks on the upside and
downside alike. On the one hand, the pandemic or trade tensions could additionally hamper
economic activity. On the other, the fiscal and monetary policy measures implemented could
support the recovery more strongly than anticipated.
Swiss economic outlook
Through to late summer, the Swiss economy also recovered markedly and more strongly than
originally expected from the first wave of the pandemic. Following a record increase, GDP
was still 2% below the pre-crisis level in the third quarter, having been more than 8% below
in the second quarter.
However, in October coronavirus also spread rapidly again in Switzerland. This has resulted
in a renewed deterioration in the economic outlook, at least in the short term. The containment
measures implemented thus far are restricting economic activity less than was the case in the
spring. However, certain industries are severely affected again, above all hospitality and
entertainment. Sentiment is also subdued in other industries. Economic momentum is thus
likely to be weak in Q4 2020 and Q1 2021.
We expect that GDP will shrink by around 3% this year. At our monetary policy assessment
in September, we had anticipated an even stronger decline. The revision is due to the fact that
the decrease in GDP resulting from the first wave of the pandemic was not as substantial as
originally expected.
Developments going forward largely depend on how successfully the spread of the virus can
be contained in Switzerland and abroad. Our assumption is that there will not be a significant
easing in the containment measures in Switzerland until the spring. Against this backdrop, we
expect GDP growth of 2.5% to 3% for 2021. The recovery thus remains incomplete.
Unemployment is likely to rise again, and production factors will remain underutilised for
some time yet. The forecast for Switzerland, as for the global economy, is subject to high
uncertainty.
Monetary policy's contribution to crisis management and outlook
Prices will decline this year as a result of the coronavirus pandemic, and economic output will
be lower than in 2019. Production capacity is likely to still be underutilised next year, with
inflation still at 0.0%. An expansionary monetary policy therefore continues to be necessary
for crisis management.
Our monetary policy contributes to crisis management via three channels. First, we provide
favourable financing conditions for Swiss businesses and the public sector via the low level of
interest rates. This eases the burden on those companies and institutions that face increased
funding needs as a result of the crisis.
Second, the negative interest rate and our foreign exchange market interventions counter the
upward pressure on the Swiss franc. This pressure is especially high in periods of uncertainty,
and a strong appreciation would weigh particularly heavily on the economy in the crisis. We
have therefore made considerable foreign exchange purchases this year to maintain
appropriate monetary conditions.
Third, we are making additional liquidity available to banks via the CRF, allowing them to
refinance the COVID-19 loans they grant and to do so at an interest rate of -0.75%. The
federal guarantees for the COVID-19 loans and the liquidity provided at favourable
conditions by the SNB have contributed towards Switzerland being able to avoid a credit
crunch in the past few months.
It will take some time yet before the economy recovers, and uncertainty will remain high for
the time being. We will therefore be seeking to do our utmost with our monetary policy to
ensure price stability and to contribute to the economic recovery.
Climate change and the SNB
I would now like to talk about the significance of climate change for the SNB. We have been
working intensively on this topic for some time now. We want to properly assess possible
consequences of climate change for the economy, for financial stability, and for the
management of our foreign exchange reserves in order to ensure that we can fulfil our
statutory mandate at all times. To this end, we also collaborate with other central banks, in
particular in the Network for Greening the Financial System (NGFS), and we work together
closely with FINMA.
As regards monetary policy, we are continuously deepening our analysis into how climate
change could affect economic growth and inflation. The dialogue with other central banks is
particularly important in this area.
When it comes to financial stability, the SNB focuses its efforts on determining the impact of
climate risks on the stability of the Swiss banking system. In a joint pilot project with
FINMA, the SNB is currently identifying the concentrations of risk of Switzerland's largest
two banks in respect of sectors exposed to higher transition risks, i.e. possible implications of
future amendments to laws.
With regard to our investment policy, in connection with the issue of climate change, we have
decided to make an adjustment to our exclusion criteria. Since 2013, we have already been
excluding investments in companies that cause severe environmental damage, violate human
rights or produce condemned weapons. With these exclusion criteria, we ensure that our
investment policy reflects the fundamental and broadly accepted values held in Switzerland.
We are now expanding the exclusion criterion pertaining to the environment by additionally
taking climate-related issues into consideration. In Switzerland, a broad consensus has formed
in recent years in favour of phasing out coal. We have therefore decided that we will from
now on exclude all companies primarily active in the mining of coal from our portfolios.
Ladies and gentlemen, thank you for your attention. It is now my pleasure to give the floor to
Fritz Zurbrügg.