As widely anticipated, the SNB kept the sight deposit rate unchanged at -0.75%, while the target range for the three-month Libor stayed at between –1.25% and –0.25%. Again, the SNB maintained the commitment to intervene the FX market when needed, reiterating that it would ‘remain active in the foreign exchange market as necessary’, while ‘taking the overall currency situation into consideration’. Policymakers appeared more concerned about the value of Swiss franc, referring to franc’s strength against the greenback. On the economic outlook, the central bank downgraded inflation expectations while leaving the growth estimates unchanged.

On the reference to the exchange rate, SNB acknowledged that the franc has ‘appreciated slightly overall on the back of the weaker US dollar’ and remains ‘highly valued’. Policymakers warned that the exchange rate condition remains ‘fragile’ and ‘monetary conditions may change rapidly’. They reiterated that ‘the negative interest rate’ policy and SNB’s ‘willingness to intervene in the foreign exchange market’ would keep the ‘attractiveness of Swiss franc investments low and eases pressure on the currency’.

On the inflation outlook, SNB revised lower the forecast to +0.6% for this year, down from +0.7% projected in the previous quarter. It also revised lower the inflation forecast to +0.9% for 2019, down from +1.1% projected previously. The central bank introduced its inflation forecast for 2020 which is expected to reach +1.9%. On GDP growth, SNB attributed the country’s 4Q17 growth, at +2.4% annualized, to strong manufacturing activities. It maintained the GDP growth forecast for 2018 at +2%

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