The lines of concern among the National Bank’s monetary authorities must be deep: “The corona pandemic continues to have a strong impact on the economy,” they write as the first sentence in the media release on the monetary policy situation in the Corona spring 2021. Only: They can do much more than stick to the expansionary monetary policy National Bank does not do at the moment.
The development of the euro-franc exchange rate has given it some room, but the SNB still writes: “Despite the recent weakening, the franc is still highly valued”. In order to stabilize economic and price developments, the National Bank will continue its expansionary monetary policy unchanged. In concrete terms, this means: the key interest rate will remain at a record low of minus 0.75 percent. If necessary, the SNB will intervene again in the foreign exchange market to weaken the Swiss franc.
Big crisis, big interventions
As a reminder: last year the SNB invested almost 110 billion francs in foreign currencies. More than ever since the minimum exchange rate was lifted in 2015. National Bank President Thomas Jordan (58) defended the enormous expansion of the balance sheet to VIEW: “We are currently experiencing the biggest global crisis since the end of the Second World War. So it is justified that the National Bank used this sum to weaken the Swiss franc.
However, monetary policy cannot solve all the problems facing the Swiss economy during the pandemic. Innkeepers, event organizers or travel agencies, for example, are dependent on so-called fiscal policy – that is, on help from the state. Jordan on the limits of monetary policy: «We cannot help individual companies or the unemployment funds. But the National Bank can help the export economy – with low interest rates and a stable Swiss franc. “
The SNB is even anticipating a decline in economic output in Switzerland in the first quarter of 2021: “The second wave of pandemics is also leaving its mark on the labor market,” the statement said. “Short-time work has increased again in recent months and unemployment has continued to rise.”
After all, if the pandemic situation does not worsen dramatically, the SNB is still anticipating a strong recovery in the Swiss economy this year, and is anticipating GDP growth of 2.5 to 3 percent. A prognosis that gives hope. In addition, the KOF Economic Research Center at ETH Zurich shares the SNB’s optimism and is now expecting economic growth of three percent.
Published: 03/25/2021, 9:35 a.m.
Last updated: 25.03.2021, 3 minutes ago
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Monetary policy National Bank leaves key interest rate percent