* SNB sees risks from euro zone, U.S. "fiscal cliff"
* SNB sees economy weakening in Q4, growing 1-1.5 pct in
* Trims inflation forecast for 2012, 2013
* Franc rallies after decision
By Silke Koltrowitz and Emma Thomasson
BERNE/ZURICH, Dec 13 The Swiss National Bank
stressed its determination on Thursday to keep a lid on the
franc at 1.20 per euro, saying the fragility of the global
economy would support demand for the safe-haven currency, making
new interventions possible.
In a statement after its quarterly policy review that
slightly lowered its near-term outlook for inflation, the SNB
said while the economy picked up again in the third quarter
after a slight downturn in the previous three months, it expects
a significant weakening in the fourth quarter.
"Given the fragility of global conditions, the downside
risks also remain high for Switzerland," SNB Chairman Thomas
Jordan said, noting substantial uncertainty surrounding the euro
zone debt crisis and budget consolidation in the United States.
"While the gradual revival in the global economy is having a
supportive effect, the strength of the Swiss franc will hold
back export momentum and corporate investment expenditure."
Jordan said global uncertainty would continue to drive
demand for secure investments like the franc despite the calmer
mood on financial markets since the European Central Bank
announced a bond buying programme in September.
"We cannot exclude the possibility that we will have to
intervene substantially again," Jordan said.
The SNB, which imposed the 1.20 limit on the franc to avoid
gains driven by the financial sector which could have crucified
its exporters, had to intervene heavily earlier this year to
defend the 1.20 limit, swelling reserves to 72 percent of
national output. But it has done less since September as an
easing of the euro zone crisis took the heat off the franc.
There had been some speculation ahead of the meeting that
the SNB could shift the cap or impose negative interest rates
and the franc was up 0.1 percent against the euro to 1.2098 at
1203 GMT as the bank dashed those predictions.
"No surprises despite rampant rumors on the cap in the
run-up to today's rates meeting," said ZKB analyst Cornelia
Swiss Economy Minister Johann Schneider-Ammann welcomed the
SNB's statement: "The franc is and remains overvalued. 1.20
provides a planning basis, in particular to the export industry
that relies on it," he told a separate news conference.
Swiss interest rates remain at rock bottom, with the bank's
target for the key three-month Libor rate 0.00-0.25 percent.
Moves by the two biggest Swiss banks to charge other banks
for holding franc deposits has pushed the franc to a 10-week low
below 1.21 in the past week - inadvertently helping the SNB by
weakening the currency.
Asked about whether the SNB might consider imposing negative
interest rates on offshore deposits in the wake of those steps,
Jordan said: "We have said clearly that we are not excluding any
measures that can help us enforce our policy."
Most analysts do not expect the SNB to need to do more,
saying the franc is likely to continue to weaken of its own
accord as concerns about the break up of the euro zone subside.
The SNB's foreign exchange reserves fell for a second month
running in November, showing it was no longer intervening
"The situation for the SNB has improved, as the euro zone
crisis has eased somewhat. The SNB no longer has to intervene,"
said Martin Huefner of Assenagon Asset Management.
"Further measures are not necessary... Even negative
interest rates are not necessary, as the pressure from inflows
SNB board member Fritz Zurbruegg said the bank would
continue to try to diversify its huge foreign currency
investments, currently largely held in highly-rated government
debt in euros, dollars and pounds sterling.
The SNB confirmed its forecast for 1 percent full-year
growth and predicted growth of 1-1.5 percent in 2013, at the
upper end of most analyst forecasts. It trimmed its inflation
forecast, predicting prices would fall 0.7 percent this year and
0.1 percent in 2013, rising just 0.4 percent in 2014, far below
the SNB's 2 percent threshold for stable prices.
Swiss producer and import prices rose 1.2 percent
year-on-year in November and were flat compared to the previous
month showing the SNB's lid on the franc is helping to stave off
Earlier on Thursday, the Swiss government said it was
cautiously optimistic for the economic outlook assuming the euro
zone debt crisis does not again escalate even as it trimmed its
growth forecast for 2013 to 1.3 percent.
The central bank also expressed renewed concern about the
booming Swiss property market but said it would only decide at a
later date whether to force banks to boost their capital buffers
against the bubble bursting.