Swiss National Bank Maintains Interest Rates At -0.75%

Following its latest quarterly policy meeting, the Swiss National Bank (SNB) made no changes in interest rates with the target rate for 3-month Libor rate continuing at -0.75%.

Consensus forecasts were for an unchanged policy, although there had been some speculation that a shift could be sanctioned with a further rate cut.

The SNB reiterated that the franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary.

The policy mandate is to achieve price stability while also supporting economic activity.

The bank was more optimistic surrounding the global growth outlook with available indicators suggesting that the outlook will continue to improve.

Although Swiss fourth-quarter GDP data was lower than expected, analysis of indicators suggested to the bank that the moderate recovery continued. The overall economic outlook was described as cautiously optimistic. The 2017 GDP growth forecast was held at 1.5%, although there was still considerable uncertainty emanating from international risks.

There were specific references to European political risks surrounding Euro-zone elections and the UK-EU Brexit negotiations.

The 2017 inflation forecast was revised to 0.3% from 0.1% in the December report, although this reflected higher energy prices rather than increased domestic pressures. In this context, the SNB expects inflation to fade with the 2018 forecast cut to 0.4% from 0.5% previously with the 2019 forecast at 1.1%.

According to the SNB, imbalances in mortgage and real estate markets persist and developments will be monitored closely.

Overall, the central bank will be hoping that a tighter Fed policy and an eventual ECB move away from an extremely accommodative policy will provide relief and alleviate upward pressure on the Swiss currency.

Market reaction was muted, although the franc edged stronger with EUR/CHF at 1.0715 from 1.0725 with USD/CHF trading close to parity.

Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.