Swiss central bank will ´not tolerate´ franc appreciation

By Francisco Miñana

Date: Thursday 14 Jun 2012

The Swiss National Bank (SNB) has held its key rate unchanged at 0 - 0.25%, as was expected by analysts, as the central bank sticks with its expansive monetary policy.

In the news conference explaining the decision, the SNB reiterated its commitment to defend the 1.20 level on the euro/Swiss franc. It explained that it was willing to buy foreign currency in unlimited quantities for this purpose. The SNB believes that greater Swiss franc appreciation would have a serious impact on Switzerland's prices and economy. "The SNB will not tolerate this. If necessary, it stands ready to take further measures at any time," it said.

The SNB also provided its 2012 economic outlook. It expects gross domestic product (GDP) growth to reach 1.5% due to an "unexpectedly strong winter half-year" but expects a significant economic slowdown in the second half of the year due to risks tied to the Eurozone. Inflation is expected to be -0.5% for 2012, 0.3% for 2013, and 0.6% for 2014.

Following the SNB announcement, the Swiss franc rose slightly versus the euro to 1.2020 before moving returning towards 1.2010. It moved up slightly to 0.9555 versus the US dollar.

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