Charlotte de Montpellier, Economist at ING, points out that the Swiss National Bank maintains ultra-loose monetary policy and in its June meeting, the SNB left its main policy rates unchanged in negative territory, the target range for the three-month Libor was maintained at between -1.25% and -0.25% and the interest rate on sight deposits remained set at -0.75%.
Key Quotes
“The SNB also reiterated “its willingness to intervene in the foreign exchange market as necessary”.”
“Since inflation is still low, this ultra-loose monetary policy is likely to continue for at least another year. Given the openness of the Swiss economy and its dependence on the EU for trade, the SNB’s worst nightmare is too strong an appreciation of the franc.”
“The SNB believes the Swiss franc is “highly valued” and that the currency is still considered to be a safe-haven asset by investors. Indeed, when global risks increase, the Swiss franc’s value tends to increase drastically, especially against the euro.”
“Turkey’s crisis illustrated this tendency clearly: the EUR/CHF exchange rate went from 1.17 on 13th July to 1.12 on 15th August, its peak since the summer of 2017. Consequently, we do not expect anything new from the SNB at its September meeting, apart from a strong emphasis on the Swiss franc’s valuation.”
“We don’t expect any rate hike before the ECB starts raising its own rates. Given that the ECB is not expecting to hike before the end of the summer of 2019, we think the SNB won’t hike interest rates before December 2019.”
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