Swiss Central Bank Keeps Negative Rates Unchanged; Cautious On Housing Market
15 Marzo 2018 - 9:16AM
RTTF2
The Swiss National Bank kept its expansionary monetary policy
unchanged at the first rate-setting meeting of the year, and
reiterated its stance on foreign exchange market intervention.
The bank also warned about the correction in the housing market
over the medium-term.
The interest rate on sight deposits at the SNB was retained at
-0.75 percent and the target range for the three-month Libor was
kept unchanged between -1.25 percent and -0.25 percent.
The bank observed that the Swiss franc has appreciated slightly
overall on the back of the weaker US dollar. The Swiss franc
remains "highly valued". The SNB assessed that the situation in the
foreign exchange market is still fragile and monetary conditions
may change rapidly.
Therefore, the SNB repeated that the negative interest rate and
its willingness to intervene in the foreign exchange market, as
necessary, remain essential.
The bank downgraded its inflation forecast for both this year
and next. Inflation for this year was seen at 0.6 percent instead
of 0.7 percent. For 2019, the SNB expects inflation of 0.9 percent
compared to 1.1 percent estimated initially. For 2020, the bank
projected 1.9 percent inflation.
A monthly report from the Federal Statistical Office showed that
producer and import prices rose 0.3 percent on month in February,
taking the annual growth to 2.3 percent.
The SNB continues to expect GDP growth of around 2 percent for
2018 and a further gradual decrease in unemployment.
The central bank cautioned that imbalances on the mortgage and
real estate markets persist. The bank said it will continue to
monitor developments on the mortgage and real estate markets
closely, and will regularly reassess the need for an adjustment of
the countercyclical capital buffer.
Jessica Hinds, an economist at Capital Economics, said the SNB
will be unwilling to raise interest rates until after the European
Central Bank has begun its process of policy normalization.
"The ECB looks set to be buying assets throughout 2018 and we
doubt that it will raise interest rates until September 2019,"
Hinds said. Therefore, the economist expects the SNB to see how the
ECB's tightening progresses and how the franc responds before
following suit.
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