At its September quarterly policy meeting, the Swiss National Bank (SNB) made no changes in interest rates with the target rate for 3-month Libor rate remaining at -0.75%.
Consensus forecasts were also for an unchanged policy.
The SNB reiterated that it would remain active in the foreign exchange market as necessary while taking the overall currency situation into consideration.
The SNB’s policy mandate is to achieve price stability while also supporting economic activity. Negative rates and intervention are aimed at making Swiss investments less attractive in order to ease upward pressure on the currency.
According to the bank, the Swiss franc has weakened against the Euro and strengthened against the dollar which has, to some extent, reduced the significant over-valuation of the currency. Nevertheless, the franc remains highly valued.
The 2017 and 2018 inflation forecasts were both increased slightly to 0.4% from 0.3% and the 2019 forecast was also raised slightly to 1.1% from 1.0% previously.
The statement illustrates relief that Swiss currency has lost some ground against the Euro which has lessened the degree of overvaluation. EUR/CHF has strengthened to above 1.1400 from just below 1.0900 at the June meeting, although this is still below the 1.20 peg which operated before January 2015.
The main focus will, however, still tend to be on the ECB policy actions and the SNB will be looking for the ECB to take steps to remove some of the policy accommodation before considering any shift in its own policies.
The Swiss currency was little changed following the decision with EUR/CHF at 1.1460 with USD/CHF at 0.9635.