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Swiss National Bank Retains Tight Money Stance

Ulrika Lomas, Tax-news.com, Brussels

18 September 2000

Last week the Swiss National Bank announced its expectations for the Swiss economy during the last quarter of 2000, saying that it would adhere to the target range of 3% - 4% for 3-month Libor set when it tightened monetary policy on 15th June.

The Bank's review of the economy so far this year shows growth of real gross domestic product in the first half of 2000 averaging 3.8%, clearly exceeding the previous year's level. Stimulating factors emanated both from abroad and from within Switzerland. Particularly noteworthy was the vigorous pickup in investment activity and exports. Capacity utilisation during the second quarter was close to its maximum, with particular pressure evident in the labour market.

Influenced mainly by swings in the price of oil, annual inflation measured by the national consumer price index moved up by 0.6 percentage points to 2.0% between April and July before again receding to 1.3% in August. Price increases for domestic goods were gratifyingly moderate.

The Bank says that leading indicators such as the development of incoming orders in industry point to a continued and broadly-based economic upswing in the next few quarters. It is, however, expected to proceed at a more relaxed pace than at the beginning of the year. For the year 2000 the National Bank anticipates average economic growth of just over 3% and for the coming year approximately 2%.

In mid-June, the National Bank had signalled a rise in inflation to probably more than 2% in 2001 as a result of the vigorous economic upswing. With the tighter monetary policy, however, it now could again be expected to drop below 2% in 2002, the level which the National Bank equates with price stability.

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