Swiss National Bank leaves expansionary monetary policy unchanged
This is the SNB's monetary policy assessment from 13 December 2018:
The Swiss National Bank (SNB) is maintaining its expansionary monetary policy, thereby
stabilizing price developments and supporting economic activity. Interest on sight deposits at
the SNB remains 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 monetary policy assessment of September 2018, the Swiss franc has depreciated
slightly on a trade-weighted basis. This development is primarily due to the strengthening of
the US dollar. The franc is virtually unchanged against the euro. Overall, the Swiss franc is
still highly valued, and the situation on the foreign exchange market continues to be fragile.
The negative interest rate and the SNB’s willingness to intervene in the foreign exchange
market as necessary remain essential. These measures keep the attractiveness of Swiss franc
investments low and reduce upward pressure on the currency.
The new conditional inflation forecast for the coming quarters is lower than it was in
September. This is mainly due to the drop in oil prices. The medium-term inflation forecast is
also slightly lower owing to more moderate growth prospects. For the current year, the SNB
continues to anticipate inflation of 0.9%. The forecast for 2019 has been revised down from
0.8% to 0.5%. For 2020, the SNB expects inflation of 1.0%, compared with its previous
forecast of 1.2%. The conditional inflation forecast is based on the assumption that the three-month
Libor remains at –0.75% over the entire forecast horizon.
Global growth lost momentum somewhat in the third quarter. However, this was largely
attributable to special factors in the euro area and Japan. Economic expansion in the US and
China remained robust. Employment figures in the advanced economies rose again and unemployment
continued to decline. The growth in international trade in goods also continued.
In its baseline scenario for global economic developments, the SNB anticipates solid growth
in the coming quarters. In the short term, the world economy is set to continue to expand
somewhat above potential, benefiting from the clear improvement in the labor market
situation and the ongoing expansionary monetary policy in the advanced economies.
However, a gradual slowdown is likely in the medium term.
Nevertheless, there are significant risks to this positive baseline scenario, primarily in
connection with political uncertainties and protectionist tendencies. These factors have had an
increasingly negative effect on both business and financial market sentiment in recent months.
Stronger turbulence could jeopardize global economic growth and have an impact on
In Switzerland, GDP fell by an annualized rate of 0.9%. Despite this decline, GDP was still
2.4% higher year-on-year thanks to the strong expansion in the previous quarters. A
slowdown in GDP momentum was to be expected after several very strong quarters.
Furthermore, the decline in GDP is also attributable to temporary factors. An analysis of all
the available economic indicators points to momentum weakening slightly but remaining
positive. The favorable development on the labor market also continued. Employment
increased strongly in the third quarter. The unemployment rate declined again through to
November to stand at 2.4%.
The SNB now anticipates slightly lower GDP growth of around 2.5% for 2018 as a whole. As
in other countries, economic momentum in Switzerland is likely to weaken somewhat in
2019. The SNB expects a rise of around 1.5% in GDP for the coming year.
Risks are to the downside, as is the case with the global economy. In particular, a sharp
slowdown internationally would quickly spread to Switzerland.
Imbalances on the mortgage and real estate markets persist. Both mortgage lending and prices
for single-family homes and privately owned apartments continued to rise at a moderate rate
over recent quarters. Although prices in the residential investment property segment have
stabilized, there is the particular risk of a correction due to strong price increases in recent
years and growing vacancy rates. The SNB will continue to monitor developments on the
mortgage and real estate markets closely, and will regularly reassess the need for an
adjustment of the countercyclical capital buffer.