Bloomberg News

Swiss Central Bank Should Keep Expansionary Policy, OECD Says

January 24, 2012

Jan. 24 (Bloomberg) -- Switzerland’s central bank must maintain its “expansionary” monetary policy as inflation pressures remain low because of the franc’s strength and cooling global growth, the Organization for Economic Cooperation and Development said.

Based on the Swiss National Bank’s inflation forecast, “monetary stimulus will therefore need to remain expansionary for some time, unless the scenario underlying the inflation projections changes, for example through a reversal of recent exchange rate developments,” the Paris-based group said in a report today. It also said that since interest rates may remain “unusually low and liquidity abundant, it is important that macroprudential measures are taken in parallel to avoid excessive mortgage lending.”

The SNB cut its benchmark rate to close to zero last year and introduced a cap on the franc after it strengthened to a record against the euro. The OECD forecast today that Swiss economic growth will accelerate to 1.9 percent next year after an 0.8 percent expansion in 2012, reiterating projections published in November.

“Surveys indicate that most firms have so far accommodated the appreciation” of the franc “by lowering margins and therefore have not reduced the volume of production,” the OECD said. Still, “there is a risk that even temporary large exchange rate appreciation can have a permanent effect on production supplied by these businesses, possibly resulting in large welfare losses.”

--Editor: Fergal O’Brien

To contact the reporter on this story: Klaus Wille in Zurich at

To contact the editor responsible for this story: Craig Stirling at

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