Swiss National Bank (SNB) leaves policy rate unchanged at -0.75%, as expected

The coronavirus pandemic is continuing to have a strong adverse effect on the economy.

Despite the recent weakening, the Swiss franc remains highly valued.

With a view to stabilising economic activity and price developments, the SNB is maintaining its expansionary monetary policy.

SNB remains willing to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. 

The new conditional inflation forecast for 2021 and 2022 is higher than in December. This is primarily due to the rise in oil prices and the weaker Swiss franc. 

Looking beyond the two year horizon, the inflation forecast is virtually unchanged compared with December. The forecast now stands at 0.2% for 2021, 0.4% for 2022 and 0.5% for 2023. 

The conditional inflation forecast is based on the assumption that the SNB policy rate remains at −0.75% over the entire forecast horizon.

Coronavirus and the measures implemented to contain it are continuing to shape the global economy more than a year after the outbreak of the pandemic. 

The SNB’s baseline scenario for the global economy anticipates a phased easing of the containment measures in place in many countries over the course of the spring. 

The economic recovery is therefore likely to regain momentum from the second quarter. 

In addition to the expected progress with vaccination programmes, the monetary and fiscal policy measures introduced worldwide are an important source of support. 

Nevertheless, global production capacity will remain underutilised for some time to come.

The SNB continues to expect GDP growth of 2.5% to 3% for 2021.

Activity is thus likely to return to its pre-crisis level in the second half of the year. However, production capacity will remain underutilised for some time yet.

In the current situation, both the inflation outlook as well as the growth forecasts for Switzerland and abroad are still subject to high uncertainty.

Mortgage lending and residential property prices have risen further in recent quarters. The vulnerability of these markets thus persists and continues to present a risk for financial stability.