Swiss keep intervention threat alive as rates left on hold


Switzerland’s central bank held interest rates at a record low and repeated its pledge to intervene in currency markets, a threat President Thomas Jordan has used to keep the franc from strengthening.
Describing the nation’s currency as “significantly overvalued,” the Swiss National Bank kept its deposit rate at minus 0.75 percent on Thursday, as expected by all economists in a Bloomberg survey. It cut both its growth and inflation forecast for 2016 and now sees prices dropping 0.8 percent this year.
In keeping rates on hold, Jordan breaks with colleagues at the European Central Bank and the Bank of Japan, who’ve acted this year to keep deflationary forces at bay, prompting criticism of competitive devaluations. The SNB could afford not to cut after last week’s ECB stimulus failed to have much impact on the franc versus the euro, the currency of its largest trade partner.
“So long as the ECB doesn’t cut rates more, I don’t think the SNB will move its deposit rate lower either, though they might have to intervene more on markets after the ECB boosted its bond-purchase program,” said Maxime Botteron, a leading economist at Credit Suisse Group AG in Zurich.
Switzerland’s economy remains in a fragile state due to the currency’s strength and deteriorating demand in China and other emerging markets, as well as commodity-producing countries. Citing a less favorable view of the global economy, the SNB lowered its prediction for Swiss growth this year to between 1 percent and 1.5 percent, from approximately 1.5 percent previously.
“We had weaker growth in emerging markets such as China, but also Europe grew much less well as did the US,” Jordan told radio station SRF4 in an interview, adding that he wasn’t excluding any monetary policy measures. “And the forecast for these markets in 2016 is a bit less good than we’d expected three months ago.”
The SNB’s warning of a global slowdown corresponds with comments from the US Fed Reserve on Wednesday, when officials scaled back expectations for future interest rate increases.

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