The Swiss National Bank made a monetary policy announcement today but markets paid little attention to it. Currently, the Swiss franc is the weakest currency on the Forex market, even losing its earlier gains versus the Australian and New Zealand dollars, which themselves were very weak. It looks like traders continue to prefer the US dollar as a refuge, ignoring other safe currencies, like the franc and the Japanese yen.
As was widely expected, the SNB kept its main interest rate unchanged at -0.75%. The central bank also reiterated that it will continue to intervene on the foreign exchange market to prevent the franc from appreciating too much. The central bank upgraded forecasts for inflation and economic growth but warned that the outlook for both inflation and gross domestic product “is subject to unusually high uncertainty”. Inflation is expected to remain negative at -0.6% this year before returning into the positive territory next year. The SNB was rather optimistic about Switzerland’s economic growth, saying:
Economic activity in Switzerland has picked up significantly since May due to the relaxation of health policy measures and to fiscal and monetary policy support. This should be reflected in a strong rise in GDP in the third quarter. The positive development is likely to continue in 2021.
Nevertheless, the forecast predicts the economy to contract 5% this year. Still, it is better than a 6% decline shown in the July forecast. The bank explained why the outlook improved:
The forecast revision is mainly due to the fact that the downturn in the first half of the year was somewhat less strong than feared.
Overall, most analysts do not think that the SNB will change its monetary policy in the foreseeable future. But there is a chance that Switzerland’s central bank may cut interest rates further if the European Central Bank does the same.
USD/CHF rose from 0.9238 to 0.9265 as of 16:19 GMT today. GBP/CHF ticked up from 134.08 to 134.29. CHF/JPY declined from 114.05 to 113.81, retreating from the session high of 114.37.
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