"We believe the time now is right to explore the possibility of alternative measures"
- Jean-Pierre Danthine, Vice Chairman of the Governing Board
A couple of years ago the Swiss National Bank's largest concern was the strength of the Franc, as investors rushed to buy the currency considering it as a safe haven. While the EUR/CHF pair is now trading comfortably above the 1.20, there is another serious concern for the policymakers arising within the economy.
While the Alpine economy was expanding moderately during the financial crisis, the monetary and exchange rate policy did not destroy deflation risks completely, as inflationary pressure still remains weak. At the same time, these measures are not preventing the development of the property bubble. Last month, after a request from the SNB the Swiss Bundesrat decided to raise the countercyclical capital buffer or CCB up to 2%, from 1% earlier.
This week, however, the SNB pledged its readiness to explore alternative methods to cool down the overheating housing market in case current macroprudential measures do not do the job. During the last couple of year both real estate prices and mortgage lending have risen sharply, being a product of SNB's ultra-low interest rates. These measures are expected to be aimed at aspects of property-market supply and borrower burden.
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