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

Swiss National Bank to hold rate at record low for years: Reuters poll
Swiss National Bank to hold rate at record low for years: Reuters poll   -   Copyright  Thomson Reuters 2021   -  
By Reuters

<div> <p><span class="caps">ZURICH</span> – 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.</p> <p>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.</p> <p>No one expects the <span class="caps">SNB</span> 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.</p> <p>The <span class="caps">ECB</span> 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.</p> <p>The earliest change in <span class="caps">SNB</span> policy is not expected to come before 2024, and Capital Economics’ analyst David Oxley said it could be even longer:</p> <p>“The <span class="caps">SNB</span> 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.”</p> <p>The interest rate on sight deposits, the tool the <span class="caps">SNB</span> uses to steer its policy rate, is also expected by economists to remain locked at minus 0.75%.</p> <p>All the analysts polled agreed that the potential absence of <span class="caps">SNB</span> Chairman Thomas Jordan on health grounds will not influence the ultra-expansive policy path the central bank has followed for the past six years.</p> <p>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.</p> <p>Rising inflation rates in the eurozone and in Switzerland are expected to be welcomed by the <span class="caps">SNB</span>, according to most analysts, but will have little impact. </p> <p>The poll found Swiss inflation would average 0.5% this year and 0.6% in 2022 – well within its target range of below 2%.</p> <p>The Swiss economy is also expected to continue its post-pandemic recovery, with <span class="caps">GDP</span> increasing by 3.5% in 2021 and 3% next year, according to the median forecast.</p> <p>“The <span class="caps">SNB</span> 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 <span class="caps">EFG</span> Bank.</p> <p>“Yet, lacking better options, the <span class="caps">SNB</span> is seen keeping its course at the next policy meeting although foreign exchange reserves exceed 130% of <span class="caps">GDP</span>.”</p> <p>(For other stories from the Reuters global economic poll, see)</p> <p/> </div>