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Swiss National Bank says inflation to be 0.1%

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Staff writer ▼ | March 18, 2016
The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. The target range for the three-month Libor remains at between –1.25% and –0.25%.
Swiss National Bank
Switzerland   GDP growth to be between 1% and 1.5%
Interest on sight deposits at the SNB is unchanged at –0.75%. The Swiss franc is still significantly overvalued.

Negative interest is making Swiss franc investments less attractive. At the same time, the SNB will remain active in the foreign exchange market, in order to influence exchange rate developments where necessary.

The new conditional inflation forecast has been revised downwards slightly compared to the previous quarter. The further drop in oil prices is contributing to a decline in inflation in the short term.

In the medium term, the main factors dampening inflation are the globally low inflation levels and the lacklustre outlook for the global economy. The SNB continues to expect that inflation will re-enter positive territory in the coming year.

It is projecting an inflation rate of –0.8% for 2016, compared with –0.5% in the December forecast. For 2017, the inflation forecast is at 0.1%, which is 0.2 percentage points lower than in the previous quarter, while for 2018 it is 0.9%.

The conditional inflation forecast is based on the assumption that the three-month Libor remains at –0.75% over the entire forecast period.

Since the SNB assumes a more modest pace of global economic growth, it is also expecting a slower recovery in Switzerland. For this year, it is anticipating GDP growth of between 1% and 1.5%, instead of around 1.5% as hitherto.

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