Swiss central bank sees deflation risk

26th August 2009, Comments 0 comments

The Swiss central bank on Tuesday said that it will wait before modifying monetary policy.

Zurich -- The Swiss central bank on Tuesday warned that deflation was a bigger risk for Switzerland than inflation at the moment, and that it would therefore wait before modifying monetary policy.

The stabilisation of financial markets and some signs of economic recovery could cause inflation, noted Thomas Jordan, a member of the Swiss National Bank's governing board.

However, he pointed out that a recovery in the global economy would have a delayed impact on the domestic Swiss economy, and that reduced production here could still last for "some time."

"Our inflation forecast shows no medium-term inflation pressure. Deflation risk far outweighs that at the moment," said Jordan.

"The inflation forecast is the central guide for our monetary policy decisions and certainly shows that extraordinary measures used to date pose no danger to medium and long term price stability."

"The SNB is therefore in a wait-and-see position," he added in a speech to a regional business association in the central town of Schwyz.

Swiss gross domestic product is expected to shrink between 2.5 to 3.0 percent in 2009, according to forecasts by the central bank.

Several industrialised economies have reported falling consumer prices in recent months amid lower oil and commodity prices.

Consumer prices in the 16 eurozone countries fell a record 0.7 percent in July over 12 months, deepening the bloc's first ever dip into deflationary territory, according to European Union data published mid-August.

AFP / Expatica

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