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19 Mar 2015
SNB keeps interest rates unchanged, says CHF is overvalued
FXStreet (Mumbai) - The Swiss National Bank (SNB) left the target range for the three-month Libor unchanged at between –1.25% and−0.25%. The interest rate on sight deposits with the SNB remains at –0.75%.
On CHF
The SNB policy statement says, “Overall, the Swiss franc is significantly overvalued and should continue to weaken over time. The SNB will continue to take account of the exchange rate situation, and its impact on inflation and economic developments, in formulating its monetary policy. It will therefore remain active in the foreign exchange market, as necessary, in order to influence monetary conditions. Negative interest helps to make it less attractive to hold investments in Swiss francs.”
GDP and Inflation forecasts revised lower
For the year as a whole, the SNB now only expects real GDP to increase by just under 1%, compared to the forecast of 2% published in December.
For 2015, the SNB has revised its inflation forecast downwards by 1% percentage point to −1.1%. Inflation reaches its low point in the third quarter of 2015, at –1.2%. Thereafter, the inflation is forecasted to rise more rapidly than in the December forecast, as the effect of interest rate reductions kicks-in. In 2016, inflation will amount to –0.5%, which is 0.8 percentage points lower than in the December forecast. Not until 2017 will inflation move into positive territory again, at 0.4%.
On CHF
The SNB policy statement says, “Overall, the Swiss franc is significantly overvalued and should continue to weaken over time. The SNB will continue to take account of the exchange rate situation, and its impact on inflation and economic developments, in formulating its monetary policy. It will therefore remain active in the foreign exchange market, as necessary, in order to influence monetary conditions. Negative interest helps to make it less attractive to hold investments in Swiss francs.”
GDP and Inflation forecasts revised lower
For the year as a whole, the SNB now only expects real GDP to increase by just under 1%, compared to the forecast of 2% published in December.
For 2015, the SNB has revised its inflation forecast downwards by 1% percentage point to −1.1%. Inflation reaches its low point in the third quarter of 2015, at –1.2%. Thereafter, the inflation is forecasted to rise more rapidly than in the December forecast, as the effect of interest rate reductions kicks-in. In 2016, inflation will amount to –0.5%, which is 0.8 percentage points lower than in the December forecast. Not until 2017 will inflation move into positive territory again, at 0.4%.