“The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. It is leaving the target range for the three-month Libor rate unchanged at 0.0–0.75%, and intends to keep the Libor within the lower part of the target range at around 0.25%.”
The SNB goes on to outline economic conditions around the globe highlighting the strengths and weaknesses. Interestingly, the Swiss economy has done relatively well despite the record strength in its currency. Specific areas of weakness are tourism and exports, both highly dependent on relative exchange rates.
On balance, the SNB found it necessary to increase its near-term inflation forecast a bit. The SNB also again acknowledged that it cannot maintain its current expansionary monetary policy given its expectation that inflation will exceed its upper limit of 2% by 2013. With its currency too strong for comfort, the SNB is clearly trying to wait as long as possible before moving to head off these higher than desired inflation levels. It is a dilemma more and more central banks will feel as the U.S. dollar continues to sink against every major currency.
From the monetary policy statement:
The recent acceleration in the franc’s strength, especially against the U.S. dollar, is a continuation of a longer-term trend. The franc is now trading at record levels against the U.S. dollar.
