Policy makers are now expecting consumer prices to grow by 0.7% in 2010 up from earlier their previous forecast of 0.5%, with price growth accelerating to 0.9% in 2011. However, the SNB did caution that the danger of deflation can’t be entirely ruled out which has them on alert to defend any excessive Franc appreciation against the Euro. The central bank also bolstered their outlook for growth to 1.5% from 0.5%-1.0%, as they see tangible signs of a recovery. The global recovery is beginning to boost demand for Swiss exports and the domestic sector is performing “well”. The SNB did caution that their forecasts are associated with “considerable uncertainties” as both the global and Swiss recovery remains “fragile”. The EUR/CHF saw initial support on the post decision comments to defend Franc appreciation but volatility has quieted on the higher outlook for inflation.
