As widely expected from the Swiss National Bank

  • 3-month libor upper target -1.25%
  • lower target rate -0.25%
  • sight deposit rate -0.75%

SNB says:

  • negative rates making franc less attractive
  • CHF remains significantly over valued
  • SNB will remain active in currency market
  • downward trend in real estate has been confirmed but imbalances persist
  • European structural weakness could hamper development
  • reassess need for adjustment of the countercyclical buffer
  • expecting a slower recovery of Swiss economy
  • global outlook has deteriorated slightly

The new conditional inflation forecast has been revised downwards slightly compared to the previous quarter. The further drop in oil prices is contributing to a decline in inflation in the short term. In the medium term, the main factors dampening inflation are the globally low inflation levels and the lacklustre outlook for the global economy. The SNB continues to expect that inflation will re-enter positive territory in the coming year. It is projecting an inflation rate of -0.8% for 2016, compared with -0.5% in the December forecast. For 2017, the inflation forecast is at 0.1%, which is 0.2 percentage points lower than in the previous quarter, while for 2018 it is 0.9%. The conditional inflation forecast is based on the assumption that the three-month Libor remains at -0.75% over the entire forecast period.

Nothing of real note and EURCHF remains around 1.0985 but USDCHF lower at 0.9725 on renewed EURUSD buying.

Full report here