by Macroview SNB likely to keep negative deposit rate until end of ECB’s asset buying programme, and focus on forex intervention to control upward pressure on franc. The Swiss National Bank (SNB) decided on September 15 to maintain its interest rate on sight deposits unchanged at -0.75%.In its quarterly monetary policy assessment, the SNB highlighted once again the Swiss franc’s overvaluation and reiterated its willingness to intervene on the foreign exchange market if needed.The central bank revised down its forecasts for inflation in Switzerland in 2017 (from 0.3% to 0.2%) and 2018 (from 0.9% to 0.6%), owing to global economic uncertainties. Its inflation forecast for 2016 remained unchanged at -0.4%. Following better-than-expected growth in the second quarter, and upward revisions for GDP in prior quarters, the SNB now expects real growth of approximately 1.5% this year in Switzerland (in line with Pictet Wealth Management’s own expectation), compared to an earlier forecast of 1%-1.5%. Our baseline scenario is for the interest rate on sight deposits with the SNB to remain at -0.75% until the end of the European Central Bank’s quantitative easing programme, or at least until appreciation pressures on the Swiss franc start to fade.
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Nadia Gharbi considers the following as important: Macroview, Swiss Franc, Swiss growth, Swiss inflation, Swiss National Bank
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SNB likely to keep negative deposit rate until end of ECB’s asset buying programme, and focus on forex intervention to control upward pressure on franc.
The Swiss National Bank (SNB) decided on September 15 to maintain its interest rate on sight deposits unchanged at -0.75%.
In its quarterly monetary policy assessment, the SNB highlighted once again the Swiss franc’s overvaluation and reiterated its willingness to intervene on the foreign exchange market if needed.
The central bank revised down its forecasts for inflation in Switzerland in 2017 (from 0.3% to 0.2%) and 2018 (from 0.9% to 0.6%), owing to global economic uncertainties. Its inflation forecast for 2016 remained unchanged at -0.4%. Following better-than-expected growth in the second quarter, and upward revisions for GDP in prior quarters, the SNB now expects real growth of approximately 1.5% this year in Switzerland (in line with Pictet Wealth Management’s own expectation), compared to an earlier forecast of 1%-1.5%.
Our baseline scenario is for the interest rate on sight deposits with the SNB to remain at -0.75% until the end of the European Central Bank’s quantitative easing programme, or at least until appreciation pressures on the Swiss franc start to fade. To deal with Swiss franc appreciation, the SNB is likely to continue to continue to intervene in the forex market before it considers further rate cuts.
Regarding future currency developments, our FX strategist sees the Swiss franc remaining at around 1.08 per euro at the end of this year. An interest-rate cut would, we believe, only be an option if the Swiss franc appreciated substantially.