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SNB stands pat, upgrades inflation forecasts slightly

SNB kept sight deposit rate unchanged at -0.75% today. Also, it remained “remains willing to intervene in the foreign exchange market as necessary, in order to counter upward pressure on the Swiss franc.” It also reiterated that “the Swiss franc remains highly valued”.

The new conditional inflation forecast for 2021 is raised to 0.5% in 2021 (up from June’s 0.4%). For 2022, it’s raised to 0.7% (from 0.6%). For 2023, it’s kept unchanged at 0.6%. SNB said it’s “primarily due to somewhat higher prices for oil products as well as for goods affected by supply bottlenecks.”

SNB also said, in the baseline scenario, it anticipated a “continuation of the economic recovery”, assuming pandemic containment measures will not need to be tightened significantly again. GDP is expected to grow around 3% in 2021, downwardly revised, attributable to “less dynamically than expected” development of consumer-related industries. GDP is expected to return to pre-crisis level in H2. But overall production capacity will “remain underutilised for some time yet”.

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