Breaking: SNB unexpectedly leaves Deposit Rate unchanged at 1.75%


At its quarterly monetary policy assessment on September 21, the Swiss National Bank (SNB) kept the benchmark Sight Deposit Rate on hold at  1.75%.

The rate decision was against the market expectations of a 25 basis points (bps) rate hike to 2.0%.

Summary of the statement

The significant tightening of monetary policy over recent quarters is countering remaining inflationary pressure.

From today’s perspective, it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term.

It cannot be ruled out that additional interest rate hikes will be necessary.

Will remain active in foreign exchange markets as necessary.

Will therefore monitor the development of inflation closely in the coming months.

To provide appropriate monetary conditions, the SNB is also willing to be active in the foreignexchange market as necessary.

Foreign currency sales in focus.

In the current environment, the focus is on selling foreign currency.

The forecast for Switzerland, as for the global economy, is subject to high uncertainty.

Inflation has declined further in recent months, and stood at 1.6% in August.

The main risk is a more pronounced economic slowdown abroad.

This decreasewas above all attributable to lower inflation on imported goods and services.

Growth is expected to remain weak for the rest of the year.

New conditional inflation forecast is based on the assumption that the SNB policy rate is 1.75% over the entire forecast horizon.

In this environment, unemployment will probably continue to rise slightly, and the utilisation of production capacity is likely to decline somewhat.

In the medium term, the new forecast issomewhat below that of June, mainly due to the economic slowdown and slightly lowerinflationary pressure from abroad

Global economic growth was moderate in the second quarter of this year.

The growth outlook for the global economy in the coming quarters remains subdued.

Although inflation continued to decline in many countries, it remains clearly above the respective targets.

Against this background, numerous central banks tightened their monetary policy furtherduring the last quarter, albeit at a slower pace than in the previous quarters

At the same time, inflation is likely to remain elevated worldwide for the time being.

Over the medium term, however, it should return to more moderate levels, not least due to more restrictive monetary policy.

 A pronounced slowdown in the global economy therefore cannot be ruled out.

Momentum on the mortgage and real estate markets has weakened noticeably in recent quarters. However, the vulnerabilities in these markets remain.

Market reaction 

In a knee-jerk reaction to the SNB rate hike pause decision, the USD/CHF pair jumped to fresh three-month highs at 0.9059, up 0.69% on the day.

About SNB Rate Decision

The Swiss National Bank conducts the country’s monetary policy as an independent central bank. It is obliged by the Constitution and by statute to act in accordance with the interests of the country as a whole. Its primary goal is to ensure price stability, while taking due account of economic developments. In so doing, it creates an appropriate environment for economic growth.

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