Swiss data was mixed last week. UBS consumption index for May, released on Wednesday, rose by 1 .35 against 1.24 in April, although this index has been declining since last June. Another indicator of inflation and consumer confidence – the volume of retail sales, which was released today, showed the decline of - 1.6% in June against -1.9% in May.
Another important indicator of the state of Swiss economy, which assesses business conditions in the manufacturing sector of Switzerland, is business activity index SVME. This index, released today, fell to 51.6 in June against the forecast of 55.4 and the value of 55.8 in May).
In general, Swiss economy is in a good state: unemployment in the country is in the lowest level in Europe and in the world (about 3%). Franc is considered to be a stable currency, although it has lost the status of safe-haven currency because of the actions SNB in the currency market. SNB hardly ever notifies about the intervention in the currency market, either before or after such intervention. This fact deters market participants from buying franc.
After the announcement of the results of the UK referendum last Friday, SNB carried out another intervention to the currency market, thus, preventing the rise in Franc against the USD and Euro.
According to SNB, franc is significantly overvalued, and many economists believe that the GDP growth in Switzerland will not exceed 1% or 1.5% in the next three to five years.
In order to stabilize franc and to prevent excessive rise in the national currency, in addition to intervention, SNB may have to lower interest rate on deposits from the current level (-0.75 per cent).
IMF predicts deterioration in the global economic prospects. According to some economists probability of recession in the world economy next year has increased from 30% to 40%.
Although IMF encourages governments and the world's largest Central Banks to stop manipulations with the exchange rates and undue declines in interest rates, the banks continue take measures to soften monetary policies in the countries. The US Fed repeatedly said about its adherence to a softer monetary policy. Next meeting of SNB will be held on September 15.