The Swiss National Bank (SNB) is sticking to its expansionary monetary policy despite rising inflation. The key rate and the interest on sight deposits at the central bank will remain at minus 0.75 percent, as the SNB announced on Thursday. The monetary authorities continue to rate the franc as highly valued, and if necessary they want to continue to use foreign exchange market interventions to counter an economically damaging appreciation of the national currency. "The National Bank is continuing its expansionary monetary policy unchanged in order to ensure price stability and to further support the recovery of the Swiss economy from the consequences of the corona pandemic," the central bank explained.
Economists surveyed by Reuters in the run-up to the quarterly monetary policy assessment of the SNB had unanimously forecast unchanged interest rates. For more than six years, the three-person board of directors led by SNB President Thomas Jordan has relied on historically low negative interest rates and foreign currency purchases to prevent the franc from appreciating. Jordan chaired the interest rate meeting after it was unclear whether the 58-year-old would return to work in time after a heart operation in August.
The SNB is not alone in sticking to its expansive course. The European Central Bank (ECB) announced at the beginning of September that it would slow down the pace of its crisis bond purchases, but an end to the emergency aid to overcome the coronavirus crisis is not in sight. The US Federal Reserve also left the key interest rate in the range of zero to 0.25 percent on Wednesday. However, the US monetary authorities have signaled that they want to leave crisis mode quickly and that there could be a first rate hike as early as 2022.
The SNB's economic assessment is more cautious than it was recently. It expects the gross domestic product (GDP) to rise by around three percent in the current year, compared with around 3.5 percent in June. Overall economic production capacities would remain underutilized for a while, said the central bank. Due to the pandemic, the forecasts are also subject to increased uncertainty.
On the other hand, inflation is likely to pick up a little more strongly this year and next than previously estimated.
"The main reason for this is again slightly higher prices for petroleum products and goods that are affected by delivery bottlenecks," explained the SNB.
"In the longer term, the inflation forecast is practically unchanged compared to June." Consumer prices are likely to rise by 0.5 percent this year, then by 0.7 percent in the coming year and by 0.6 percent in 2023. The SNB has a need for action who are aiming for inflation between zero and two percent, do not start with it.