Outlook for Swiss National Bank

The Swiss National Bank meets Thursday. A change in its monetary stance is not likely for several months at least. However, the SNB will provide new GDP and inflation forecasts that investors may find helpful. The Swiss government provided new forecasts today, ahead of the SNB. Growth this year is put at 2.7%, while the SNB's forecast is for 2.5%. The government raised its forecast for next year's GDP to 1.5% from 1.2%. It will be interesting to see if the SNB sees such a marked slowdown. The government expects 0.7% CPI this year and next.

The SNB targets 3-month LIBOR in a 0-75 bp range. Within that range, it aims for 25 bp. The first step in the adjustment of monetary policy could be an increase toward the middle of the range. Although Swiss officials have express concern about the increase in real estate prices, on balance the strength of the Swiss franc and the deterioration of its export markets serve to keep the SNB on the sidelines.

Switzerland will go to the polls in October 2011. It is currently governed by a grand coalition that all four major parties are represented. This will not prevent vociferous debating and campaigning.

Of the G10 currencies, the Swiss franc is among the best performers, gaining 7.3% against the dollar and nearly 14% against the euro. The euro zone financial crisis and the perceived safe-haven appeal (including its substantial current account surplus--more than 7% of GDP) have underpinned it this year.