Swiss National Bank Retains Negative Interest Rates
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.
The interest rate on sight deposits at the central bank was maintained at -0.75 percent, and the target range for the three-month libor between -1.25 percent and -0.25 percent.
ING Bank NV Economist Julien Manceaux expects the SNB to cut interest rate in the second half of the year.
In January 2015, the SNB unexpectedly discontinued the minimum exchange rate of CHF 1.2 per euro, resulting in a sharp appreciation of the currency.
The SNB repeated that the Swiss franc is still significantly overvalued and it will remain active in the foreign exchange market in order to influence the exchange rate developments where necessary.
The negative interest rate together with the willingness of the SNB to intervene in the foreign exchange market serve to ease pressure on the Swiss franc, the bank said. The monetary policy is thus helping to stabilize price developments and underpin economic activity.
Downgrading its inflation forecast, the SNB said it continues to expect inflation to re-enter positive territory in the coming year. For 2016, the bank expects consumer prices to fall 0.8 percent instead of previously projected 0.5 percent.
For 2017, the inflation forecast is at 0.1 percent compared to 0.3 percent estimated in December. Inflation is forecast to improve to 0.9 percent in 2018.
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.
Earlier in the day, the State Secretariat for Economic Affairs said that it does not expect a marked and quick acceleration in the Swiss GDP growth over the coming quarters.
The economy is forecast to grow 1.4 percent this year versus 1.5 percent projected in December. For 2017, the agency trimmed outlook to 1.8 percent from 1.9 percent.
The material has been provided by InstaForex Company - www.instaforex.com
