Swiss National Bank unites economists in expecting rate freeze
ZURICH, March 19 (Reuters) - The Swiss National Bank will
leave its ultra-loose policy alone on Thursday, said all the
economists polled by Reuters, and most don't expect any change
until at least 2021.
All 32 economists polled by Reuters expect SNB Chairman
Thomas Jordan to maintain the bank's negative interest rates and
readiness to intervene in currency markets to restrain the
safe-haven Swiss franc.
They expect the SNB to keep its target range for the London
Interbank Offered Rate (LIBOR) locked at -1.25 to -0.25 percent,
the same level since it ditched its minimum exchange rate of
1.20 Swiss francs to the euro four years ago.
None of the respondents expect any change until the end of
this year, especially in view of the European Central Bank's
slowing of its own policy normalisation. Most forecast it will
come in 2021 at the earliest.
"We do not expect the SNB to change interest rates before
the end of 2020. In fact, if we are correct in our assessment
that the ECB will be forced to re-start QE next year, upward
pressure on the franc – and SNB concerns about deflation – are
likely to intensify into 2020," said Jack Allen at Capital
"This means the SNB may have to delve into its toolbox to
ease policy next year," Allen said. He thinks the SNB might take
rates even further into negative territory if necessary.
There was also no disagreement about the negative interest
rate the SNB charges on sight deposits. All the economists
expect -0.75 percent to be maintained this week.
All but one expected the bank to retain its description of
the franc as "highly valued". That one expected it will be
described as "significantly overvalued". The franc has gained 3
percent against the euro in the last 12 months to trade around
A strong franc weighs on Switzerland's export-reliant
economy and also adds deflationary pressure. The SNB is expected
to cut its 2019 inflation forecast on Thursday from its current
view of 1 percent.
The SNB will have to wait at least until the ECB starts its
monetary policy tightening -- now delayed to 2020 at the
earliest -- before it begins its own path to normalisation,
"Pressure on the SNB is mounting from two sides: on the one
hand, the financial industry and pension funds are increasingly
coming under pressure, which puts pressure on the SNB to end the
negative interest rate phase as early as possible," said
Alessandro Bee at UBS.
"On the other hand, the weakness in European growth and the
various political risks lead to a higher risk of a Swiss franc
appreciation. The SNB is between a rock and a hard place."
(Reporting by John Revill, polling by Manjul Paul and Richa
Rebello, editing by Larry King)
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