The Swiss National Bank (SNB) has today reaffirmed its commitment to stabilise the exchange rate of the Swiss Franc (CHF) at 1.20 to the euro, in a bid to prevent further appreciation.
Responding to a recent deterioration of Switzerland’s economic climate, with GDP unexpectedly stalling at 0.5% in the second quarter of 2014. The central bank pledged to react with “utmost determination” which included preparations of foreign currency purchases in “unlimited quantities.”
The CHF has been pegged against the euro since 2012 amid concerns that a strong appreciation of the CHF could threaten Swiss competitiveness in the European Union.
With three month Libor rates remaining close to zero, the SNB highlighted that minimum exchange rates will remain a key tool to “avoid an undesirable tightening of monetary conditions.”
With regard to the inflation forecasts, the SNB highlighted that despite unchanged forecasts at 0.1% for 2014, forecasts for 2015 were cut by 0.1% to 0.2%, highlighting that the risk of deflation has increased again.