September 27, 2012 6:31 am

Switzerland’s central bank holds the line

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The Swiss National Bank reaffirmed in an official statement on September 13 that it is leaving the minimum exchange rate unchanged at SFr1.20 per euro, and re-emphasised that it will continue to enforce this floor with the utmost determination.

It remains committed to buying foreign currency in unlimited quantities for this purpose.

The Swiss franc is still high and is weighing on the Swiss economy. For this reason, the SNB will not allow it to appreciate, given the serious impact this would have on both prices and economic performance in Switzerland.

It also said it is leaving the target range for three-month Libor unchanged at 0.0-0.25 per cent and stands ready to take further measures at any time, if necessary.

The SNB added that its conditional inflation forecast has been adjusted downwards slightly since its June report.

This stems partly from the unfavourable prospects for the global economy and a more pronounced underutilisation of production capacity in Switzerland, and partly from the fact that depreciation of the franc has failed to materialise as expected.

The central bank continues to project that the Swiss franc will weaken over the forecast horizon. It is expecting an inflation rate of -0.6 per cent for 2012, 0.2 per cent for 2013, and 0.4 per cent for 2014.

Consequently, there is no threat of inflation in Switzerland in the foreseeable future, says the SNB.

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