SNB keeps policy unchanged, no surprises
The Swiss National Bank (SNB), in its quarterly monetary policy review, maintained status quo, in line with expectations. The EUR/CHF floor was unchanged at 1.20 while stressing that the minimum exchange rate remains important in order to avoid an undesirable tightening of monetary conditions. The SNB also reiterated its pledge to buy unlimited amount of foreign currency to defend the floor. The benchmark 3-month Libor target range was left unchanged at 0.0-0.25%, with bias towards the lower end.
SNB notes improved economic conditions, but highlights risks
The SNB said that the Q3 domestic GDP growth was favourable. However, it noted that the economic situation in the global economy remained uncertain. Specifically, SNB expressed concerns over the forthcoming assessment of banks' balance sheets in the Eurozone. The SNB kept its 2013 GDP growth forecast unchanged +1.5-2.0% YoY (GDP grew by 1.9% YoY in Q3).
SNB trims inflation forecasts; reiterates absence of inflation risks
The SNB slightly revised down its 2014 inflation forecast to (+)0.2% vs. the earlier projection of (+)0.3% YoY, while keeping the 2013 projection unchanged at (-)0.2% YoY. The long-term inflation outlook remains unchanged. The SNB expects no threat of high inflation in the foreseeable future and remains comfortable maintaining its ultra-easy monetary policy stance.
Outlook: Policy expected to remain accommodative
Despite recent improvement in growth, the SNB continued to sound caution and highlighted the downside risks to growth. While the SNB did acknowledge the rise in real estate prices, it made no indication that it could tighten liquidity to rein in property prices. The statement continued to emphasise on the need for keeping monetary conditions supportive of growth.
Thus, it is expected that SNB will keep the policy rate target unchanged at record low of 0-0.25% at least till June 2014. On EUR/CHF floor, no action is expected in the near term as the SNB remains in a wait-and watch mode.
Please refer to the attached document for the detailed report.
Regards,
ICICI Bank : Treasury Research
Contact:
Tadit Kundu
022-2653-1414 (extn: 2087)
