Thomas Jordan: Swiss National Bank’s monetary policy decision and assessment of the Swiss economic situation Introductory remarks by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Media News Conference of the Swiss National Bank, Berne, 1 December 2014. *  *  *  Ladies and gentlemen Welcome to the Swiss National Bank’s six-monthly news conference. I will begin by explaining the Governing Board’s monetary policy decision and outlining our assessment of the economic situation. I will then hand over to my colleagues, Jean-Pierre Danthine and Fritz Zurbrügg, who will comment on current developments in financial stability and the financial markets. Thereafter, we will be happy to take your questions. Monetary policy decision I will begin with our monetary policy decision. The Swiss National Bank (SNB) has decided to maintain the minimum exchange rate of CHF 1.20 per euro. The target range for the three-month Libor remains at 0.0–0.25%. Deflation risks have increased once again in recent months, and the Swiss franc is still high. We will therefore continue to enforce the minimum exchange rate with the utmost determination. If necessary, we are prepared to buy foreign currency in unlimited quantities for this purpose. With interest rates at zero, the minimum exchange rate is the key instrument to avoid an undesirable tightening of monetary conditions. This is especially important at the moment, as upward pressure on the Swiss franc has intensified once again. Furthermore, we will not hesitate to take further measures, should they prove necessary.
We are able to control the interest rates in the money market via various policy instruments through an efficient liquidity management and affect the money market rates in the favored direction and to the required extent. Accordingly, I would like to underline that in addition to the average funding cost, Interbank Repo Market rates shown in the chart should be closely monitored for a better assessment of the monetary policy stance. We will gradually raise this predictability of the monetary policy in the period ahead and ensure that interest rates in the Interbank Money Market to hover around 6.75 percent except the days on which the EPS is implemented. To enhance predictability in the funding strategy, we will limit the stock amount of the weekly funding we provide through the quantity auction method at 4.5 percent, not to exceed TL 10 billion until the year-end. Moreover, issues regarding the implementation procedures besides the funding amount to be made under this method as of 2014 will be elaborated on in the Monetary and Exchange Rate Policy for 2014 to be published in December 2014. Under this outlook with a gradual increase in predictability, I would like to remind you that our monetary policy will remain cautious until the inflation outlook becomes consistent with the medium-term projections. In the third quarter, interest rates were down from the previous reporting period across all maturities, with a larger decrease in the shorter end, while the yield curve trended upwards (Chart 5).