SNB kept policy rate unchanged at -0.75% as widely expected. It also reiterated the willingness for FX intervention as necessary. Franc is seen as remaining “highly valued”, and the foreign exchange market is “still fragile”. “Negative interest and the willingness to intervene counteract the attractiveness of Swiss franc investments and thus ease the upward pressure on the currency”. In this way, the SNB “stabilises price developments and supports economic activity.”
Conditional inflation forecasts were lowered slightly. 2019 inflation forecast was unchanged at 0.4%. For 2020, inflation forecast was downgraded from 0.2% to 0.1%. For 2021, inflation forecast was also downgraded from 0.6% to 0.5%. GDP is expected to growth by around 1% in 2019. SNB expects growth at 1.5-2.0% in 2020, reflecting “gradual firming” in global activity.
In the press conference, SNB Chairman Thomas Jordan emphasized that negative interest rate “remains necessary” after being introduced five years ago. While the policy “attracts criticism”, policy makers “are convinced that the benefit clearly hold sway”. He also pledged to monitor the impact of negative interest “precisely” and “take the side-effects seriously”.
