Swiss Benchmark Rate Remains Unchanged at a Six-Year High.

Swiss central bank left its benchmark rate unchanged for the second consecutive time after raising them every quarter for the last two years as global economic growth has waned and inflation in the country has continued to grow.

The Swiss economy has fared well despite the slowdown of its main European trading partners and the losses it has suffered in the finance sector due to the factors in the US and current credit situation.

Inflation is growing at its fasters rate in 14 years, however the resilience being displayed by the economy has given the Swiss central bank more leeway allowing a laisez a faire response.

The dilemma for the central bank is that they have lowered the estimated growth rate whilst raising its inflation forecast, hence the anticipation of a year of unchanged rates.

According to Holger Schmieding, chief European economist at Bank of America Corp “the SNB, quite unlike the European Central Bank, is saying that softer growth now will lead to less inflation and that despite it’s a neutral stance for now, but it could mean the SNB would cut rates should the outlook deteriorate.”

Due to the fact that the Swiss economy is small yet highly interconnected it is exposed to the global downturn and according to Eoin O’Callaghan, an economist at BNP Paribas, “the external situation has deteriorated significantly. I’m expecting a rather sharp slowdown this year.”

The SNB however estimated that by December the slowed economic growth shall bring inflation back into line, below its price stability threshold which is currently set at 2 percent.

Story link: Swiss Benchmark Rate Remains Unchanged at a Six-Year High.