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Philipp Hildebrand: Overview of the Swiss and global economy

Introductory remarks by Mr Philipp Hildebrand, Chairman of the Governing Board of the Swiss National Bank, at the half-yearly media news conference, Berne, 16 June 2011.


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The Swiss National Bank (SNB) is maintaining its expansionary monetary policy. The target range for the three-month Libor remains at 0.0–0.75%, and the SNB intends to keep the Libor within the lower part of the target range at around 0.25%.

The global economic recovery is continuing, even if the outlook has dampened somewhat in the past few weeks. The level of capacity utilisation in the Swiss economy is rising. Despite the strong appreciation of the Swiss franc, the economy continues to benefit from robust international demand. However, margins in the export industry are coming under increasing pressure. For 2011, the SNB is maintaining its forecast of real growth in Swiss GDP of around 2%.

Overall, however, downside risks predominate. These include, in particular, the debt problems in the euro area periphery. In addition, high deficits require several countries in various parts of the world to undertake fiscal consolidation measures, economic fragility notwithstanding. The recent commodity price increase weighs on global economic growth and poses upside risks to inflation. In Switzerland, the main risks remain, on the one hand, the effects of the strong Swiss franc on the export industry and, on the other, the danger of overheating in the real estate sector.

Until the beginning of 2012, the path of the SNB’s conditional inflation forecast lies above that of the previous quarter’s forecast. This is attributable to the assumption of higher oil prices compared to the previous quarter and somewhat higher import prices. Assuming an unchanged three-month Libor of 0.25% over the forecast horizon, the SNB expects average inflation rates of 0.9% for 2011, 1.0% for 2012 and 1.7% for 2013. Over the course of 2012, the path of the new forecast is lower than that of March because of the latest appreciation of the Swiss franc and the slightly slower development of international growth. Towards the end of the forecast period, inflation rises briskly and exceeds the upper bound of 2%. This shows that the current expansionary monetary policy cannot be maintained over the entire forecast horizon without compromising price stability in the long term. Due to the risks mentioned previously, the conditional inflation forecast is, however, associated with a high level of uncertainty.

Global economic outlook

Economic growth continued worldwide in the first quarter, although there were considerable regional differences. As in the previous quarters, the emerging economies recorded the highest growth rates. In the euro area, particularly Germany, the recovery was supported by strong export and investment activity. In the US, by contrast, high energy prices weighed on sentiment and held back growth. In addition, the persistent crisis on the real estate market is hampering the economic recovery. In Japan, there was a significant decline in GDP as a result of the earthquake.

Although the international economic outlook is somewhat less favourable than in March, the upswing in the global economy is likely to be maintained in the months ahead. In the US, in particular, the latest production and labour market indicators have been disappointing. Due to the high commodity prices and the production losses in Japan, the SNB has revised its 2011 growth forecast for the advanced economies downwards to some extent. Moreover, numerous countries are planning to undertake additional cost-cutting measures in the year

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