As expected, the SNB left the target rate for the 3M Libor unchanged at 0.25% (within the target range of 0-0.75%) and decided to continue their expansive monetary policy with a generous provision of liquidity and FX interventions. The purchase of Swiss franc bonds issued by private sector borrowers will be discontinued, though. The assessment of the economic development improved slightly, with expected GDP growth rates of -1.5% for 2009 and 0.5% to 1% for 2010, while the inflation forecast remained unchanged and is positive from 2010 on.

Thus, the SNB took the first symbolic step towards a minor tightening of the policy, even though it really is symbolic, as the bond purchases represented only a small part of the expansionary measures. Of much greater importance are the expansion of liquidity provision and the FX interventions. The latter should not be stopped unless strengthening pressures on the franc abate decisively. As a consequence, rates should not be hiked prior to other central banks (ECB), as such a step would generate additional strengthening pressures on the franc. Liquidity provision might be slightly reduced in the future, as this might not have a great impact on the 3M Libor, which remained very stable at the target of 0.25%. Market reactions have been accordingly subdued.