OREANDA-NEWS. The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. Interest on sight deposits at the SNB is to remain at –0.75% and the target range for the three-month Libor is unchanged at between –1.25% and –0.25%. At the same time, the SNB will remain active in the foreign exchange market, as necessary. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market are intended to make Swiss franc investments less attractive, thereby easing pressure on the currency. The Swiss franc is still significantly overvalued. The SNB’s expansionary monetary policy is aimed at stabilising price developments and supporting economic activity.

The new conditional inflation forecast suggests inflation will rise faster over the coming quarters than the SNB predicted in March, principally due to the significant increase in oil prices in the intervening period. The effect of this oil price rise on annual inflation vanishes after the first quarter of 2017. The new conditional forecast subsequently moves closer to that of the last quarter, and is in line with it from 2018. At –0.4%, the inflation forecast for 2016 is 0.4 percentage points higher than in March. For 2017, the SNB expects an inflation rate of 0.3%, compared to 0.1% forecast in the last quarter, while still anticipating a rate of 0.9% for 2018. The conditional inflation forecast is based on the assumption that the three-month Liboremains at –0.75% over the entire forecast horizon.