Swiss National Bank maintains expansionary monetary policy

Swiss National Bank said that the coronavirus pandemic and the measures implemented to contain it have led to a severe downturn in economic activity and a decline in inflation both in Switzerland and abroad. The SNB’s expansionary monetary policy remains necessary to ensure appropriate monetary conditions in Switzerland.

The SNB is keeping the SNB policy rate and interest on sight deposits at the SNB at −0.75%, and in light of the highly valued Swiss franc it remains willing to intervene more strongly in the foreign exchange market. In so doing, it takes the overall exchange rate situation into account. Furthermore, under the SNB COVID-19 refinancing facility (CRF), it is providing the banking system with additional liquidity and thus supporting the supply of credit to the economy at favourable terms. The SNB’s expansionary monetary policy helps stabilise economic activity and price developments in Switzerland.

In the current situation, inflation and growth forecasts are subject to unusually high uncertainty. The new conditional inflation forecast is lower than in March. This is primarily due to the significantly weaker growth prospects and lower oil prices. The forecast for the current year is negative (−0.7%). The inflation rate is likely to rise in 2021, but still be slightly negative (−0.2%), before returning to positive territory 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 coronavirus pandemic has pushed the global economy into a sharp recession. The measures to contain the virus have massively restricted both production and consumption, which already led to a severe economic downturn in many countries in the first quarter of 2020. The decline in global GDP is likely to be even more pronounced in the second quarter. Unemployment has increased in many countries, with short-time work schemes having prevented a stronger rise in Europe.