Charlotte de Montpellier, economist at ING, points out that as per expectations, the SNB decided to keep its main policy rate unchanged at -0.75%.
Key Quotes
“The European Central Bank's decision to reduce its deposit rate to -0.5% had no influence on the SNB rate, even though SNB officials have previously emphasised the importance of the interest rate differential between Switzerland and the eurozone. The SNB's interest rate differential with the ECB's deposit facility rate is now 25 basis points, which seems sufficient for the SNB at present, especially because the spread on the three-month horizon has not changed much so far.”
“The SNB has also stated that it's always ready to intervene in the foreign exchange market when it is deemed necessary. Even with the recent appreciation in trade-weighted terms, the Swiss franc is still considered 'highly valued' by the SNB rather than 'overvalued'.”
“The SNB revised its inflation forecasts (conditional on an unchanged policy rate) sharply downward. The forecast for the current year has fallen slightly to 0.4% from 0.6% in June. For 2020, the SNB now expects an inflation rate of 0.2%, compared to 0.7% previously. For 2021, projected inflation now stands at 0.6% from 1.1% before. This is very low and can be seen as a sign that the SNB does not expect a return to normal monetary policy over the forecast horizon. This is a very clear message: don't expect a positive policy rate in the coming years.”
“The big surprise of the day came from the SNB's revision of its tiering system for sight deposits subject to negative rates.”
“After today's rather dovish decisions, we expect rates to remain at their current low level for a long time. We do not expect a rate hike in the next few years.”
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