The Swiss National Bank retained its negative interest rate and repeated that it will be active in the foreign exchange market as the Swiss franc remains significantly overvalued.
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As unanimously expected by economists in a Reuters poll, the Swiss National Bank (SNB) kept its target range for three-month Libor between -1.25 and -0.25 percent. The interest rates on deposits will remain unchanged at -0.75 per cent.
Looking into the press release, the SNB commented that the Swiss franc is still significantly overvalued, and that Negative interest is making Swiss franc investments less attractive. A sigh of relief was felt at the SNB’s headquarters as the franc hit the level of 1.10 to the euro after the European Central Bank decisions became public last Thursday.
Currency markets shrugged off the rate decision.
Speaking to Swiss television, SNB Chairman Thomas Jordan left the door open for further policy action if needed. “But for the moment, after a comprehensive analysis, we concluded that the current monetary policy is the right one and we want to keep to this monetary policy for the moment”.
The SNB expects a slower recovery and sees GDP growth of between 1 percent and 1.5 percent this year compared to around 1.5 percent projected in December. Inflation is forecast to improve to 0.9 percent in 2018.
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SECO cut its inflation forecast for this year to -0.6 per cent from -0.1 per cent. The updated inflation forecast for 2016 (-0.8%) and 2017 (+0.1%) show a small downward revision, mostly on the back of a lower expected path for oil prices.
