Swiss National Bank to hold rate at record low for years: Reuters poll

September 21, 2021

ZURICH (Reuters) – The Swiss National Bank is set to look past a mild near-term rise in inflation at home as well as a slightly weaker franc and stick firmly to its ultra-expansive monetary policy on Thursday, according to a Reuters poll of economists.

All 36 economists in the Sept 14-20 poll expect the Swiss central bank to keep its policy rate locked at minus 0.75% – the lowest in the world – when it gives its latest update.

No one expects the SNB to alter rates during the forecast horizon, which runs to the first quarter of 2023, with the European Central Bank’s cautious approach leaving the Swiss with little room for manoeuvre.

The ECB this month said it would trim its emergency bond purchases, but this has been followed by only a tiny weakening in the franc against the euro.

The earliest change in SNB policy is not expected to come before 2024, and Capital Economics’ analyst David Oxley said it could be even longer:

“The SNB is unlikely to move before the European Central Bank and, while it’s hard to judge, we don’t have any rate hikes pencilled in the euro area until 2026.”

The interest rate on sight deposits, the tool the SNB uses to steer its policy rate, is also expected by economists to remain locked at minus 0.75%.

All the analysts polled agreed that the potential absence of SNB Chairman Thomas Jordan on health grounds will not influence the ultra-expansive policy path the central bank has followed for the past six years.

Jordan has been treated for a heart problem and in his absence deliberations will be led by Vice Chairman Fritz Zurbruegg, who has recently stressed the importance of negative rates to prevent the safe-haven franc surging in value.

Rising inflation rates in the eurozone and in Switzerland are expected to be welcomed by the SNB, according to most analysts, but will have little impact.

The poll found Swiss inflation would average 0.5% this year and 0.6% in 2022 – well within its target range of below 2%.

The Swiss economy is also expected to continue its post-pandemic recovery, with GDP increasing by 3.5% in 2021 and 3% next year, according to the median forecast.

“The SNB remains in an uncomfortable position: inflation is too low and the franc is high despite years of record low negative interest rates and continued intervention on currency markets,” said GianLuigi Mandruzzato at EFG Bank.

“Yet, lacking better options, the SNB is seen keeping its course at the next policy meeting although foreign exchange reserves exceed 130% of GDP.”

(For other stories from the Reuters global economic poll, see)

(Reporting by John Revill; Polling by Vijayalakshmi Srinivasan and Indradip Ghosh; Editing by Kevin Liffey)

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