SNB Keeps Rates on Hold; Lowers GDP & CPI Forecasts
There was no change from the Swiss National Bank this morning on either its interest rates – which remain at 0.00% - or its liquidity efforts to weaken the franc and keep Eur/Chf above 1.20. The central bank reiterated its aggressive language of tackling franc strength with unlimited liquidity and franc sales. They also noted that if economic and/or deflationary needs required that would take further measures to weaken the franc.
Where the central bank did make some changes was in its GDP and CPI forecasts, both of which have been lowered. The SNB lowered its previous estimated of 2% growth in 2011 to a more cautious 1.5%-2% range as it says that growth in Switzerland is going to halt in the second half of 2011. On the inflation front the central bank cut its 2011 forecast to 0.4% from 0.9%, CPI is expected to turn negative in 2012 (-0.3% forecast) and returning to positive numbers (+0.5%) in 2013 with forecasts further out, in 2014, estimating CPI will accelerate to 1%.
The Swiss franc was utterly unmoved in the aftermath of the largely as expected result from the SNB. Chatter however, has been growing in the market that major players are waiting for a trigger event, ie a Greek default, to test the resolve of the SNB in defending the 1.20 level. With that in mind sideways trade is the likely course in coming days and weeks. For a full technical outlook.
Written by Jonathan Granby, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.