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Livesquawk - SNB Reiterates Rates, Guidance
SNB Reiterates Rates, Guidance
The SNB said the franc remains "highly valued".

- Benchmark rate remains at global low -0.75pct

- Bank repeats willingness to intervene on FX markets

- Swiss growth forecast cut to 3%

- Inflation projection raised again

 

By Eric Culp, European Editor

LiveSquawk News

@EricCulpLS

23 September 2021 | 08:50 GMT

 

The Swiss National Bank said Thursday that it would hold interest rates at current levels as central bankers in other countries move to tighten monetary policy at a time when Covid-19 continues to abate in some regions.

 

The SNB said it would keep its main policy and sight deposit interest rates at -0.75%, currently the lowest in the world. It repeated that it is “willing to intervene in the foreign exchange market as necessary”, noting that it sees the franc as “highly-valued”.

 

The continued holding pattern in the Alps clashes with recent steps by a number of banks toward tighter monetary policy. The latest in line was the US Federal Reserve, whose president said Wednesday that the bar for tapering could be met “as soon as the next meeting”. This spurred talk among analysts about US rate hikes.

 

Interest rates are expected to stay at a global low in Switzerland for a long time, economists say, and the rest of Europe is to blame. With the Old World’s recovery lagging behind America’s, the European Central Bank’s tightening is likely to come after Fed’s, with the SNB expected to hold off on rate hikes until the first ones in the Eurozone.

 

“The SNB is unlikely to raise interest rates until after the ECB, and so probably well beyond our forecast horizon and in all likelihood not until the second half of this decade,” said David Oxley, senior European economist at Capital Economics. “If you’re looking for policy action, you’ve come to the wrong place!”

 

Bank cuts growth outlook, raises inflation forecasts

On the Swiss economic front, the SNB said it sees a decrease in commercial activity and higher inflation. It cut its GDP growth forecast for the year to 3.0% from its 3.5% projection in June.

 

At the same time, it raised this year’s inflation expectation to 0.5% versus the 0.4% prediction three months ago. In March, it said consumer prices would only increase 0.2% this year.

 

The bank also raised its 2022 inflation forecast to 0.7% from 0.6% while holding the 2023 estimate at 0.6%.