June 11, 2019
By John Revill
ZURICH (Reuters) – The Swiss National Bank will hold its ultra-loose monetary policy unchanged on Thursday and foreseeably until at least 2021, a Reuters poll showed, declining to track any tentative moves by other central banks to relax interest rates further.
The bank’s target range for the three-month London Interbank Offered Rate (LIBOR) will stay at -1.25% to -0.25%, according to all 35 economists polled by Reuters from June 6-10.
At Thursday’s policy meeting, the SNB will also hold the negative interest rate it charges on commercial banks’ sight deposits above a certain level at -0.75%, they all said.
The U.S. Federal Reserve and the European Central Bank have, to varying degrees, hinted at further rate cuts to tackle weakening economic growth.
The SNB has said it is also open to cutting further, but six of the seven economists who answered a supplementary question said they still expected the bank’s next rate move to be upward.
“For the time being, I do not expect a change in rates before the next economic cycle, around 2023. Nevertheless, we believe that the ECB could reduce its deposit rate by the end of the year,” said Charlotte de Montpellier, an economist at ING.
Traders are expecting a Fed interest rate cut in July and some see a 65% chance that it will cut twice more this year as U.S. hiring slows. ECB policymakers are also open to further easing if required.
“I do not think that (an ECB cut) …would force the SNB to react and also lower its rate,” said de Montpellier.
But, if that led to strong gains in the Swiss franc, she said she did not rule it out. “This is not my main scenario, but it is a risk that exists.”
The franc last week reached its highest in nearly two years as investors sought the safe-haven currency amid escalating global trade tensions.
In this situation the SNB is expected to retain its description of the franc as “highly valued,” the economists said.
Swiss base rates have remained unchanged for four-and-a-half years, and most of the analysts said they expected no change to the sight deposit rates until 2021 at the earliest.
“As long as the ECB stands pat, the SNB will be reluctant to change its course and rather deal with (franc)… appreciation pressure with (market) intervention if needed,” said Christin Kyrme Tuxen at Danske Bank.
(Reporting by John Revill; Polling by Manjul Paul; editing by Gabrielle Tetrault-Farber and John Stonestreet)