By TraderVox.com
Tradervox (Dublin) – The Swiss National Bank held its interest rate at zero as it had been forecasted by many analysts. The SNB governor indicated that they took this decision as they try to keep the Franc from strengthening further against the euro. The Franc increased by 37 percent against the euro before a cap of 1.20 was introduced in September. Thomas Jordan, the Swiss National Bank interim governor, have sworn to defend the franc ceiling of 1.20 by any means possible if the situation call for it.
After this announcement the franc rose 0.3 percent to settle at 1.20999 per euro while it increased by 0.2 percent against the dollar to settle at 92.84 centimes. There has been gradual improvement in the Swiss economy which is expected to bring pose some challenges in the efforts of the SNB to maintain the franc cap.
The central bank reported that the Swiss GDP and the country’s investor confidence unexpectedly grew in the fourth quarter. This has resulted to change of economic growth forecast by the bank for 2012. However, Jordan was keen to mention that the euro region remains a considerable risk but stressed that he would do everything to defend the EURCHF cap.
In this statement, SNB also lowered inflation forecast, indicating that last years appreciation of the franc had dampened the prices than expected. The banks estimates that inflation will be lower in the long term due to the worsening euro region growth as well as the over valued franc. SNB further suggested that the economy may grow moderately by 1 percent in 2012 shifting from its previous forecast of 0.5 percent. However, it noted that there is a risk to financial stability posed by the imbalances in residential real estate market.
The bank had previously used 17.8 billions francs to curb the Franc’s overvaluation. It indicated that it is willing to do anything to keep the currency at its current level against the euro. The Swiss currency is still about 6 percent higher against the euro than it was last year despite the measure being taken by the Bank.
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