Swiss interest rates unchanged despite Brexit risk
The Swiss National Bank (SNB) has opted to stick with the current interest rate band of between -1.25% and -0.25% at its quarterly monetary policy assessment. The central bank reiterated its willingness to intervene in the currency markets to keep the franc in check, bearing in mind the looming threat of euro volatility should Britain leave the European Union next week.
The central bank will continue to charge domestic banks a negative interest rate of -0.75% to deposit their reserves at the SNB.
This week, the franc-euro exchange rate fell below CHF1.08 for the first time since December as opinion polls in Britain continued to show next Friday’s Brexit vote as too close to call. Throughout the second half of 2015 it traded mostly at around CHF1.09 to CHF1.11.
The looming Brexit vote has created volatility on the markets with investors opting to move their assets to the safe haven franc. Any increase in the franc’s value relative to the euro and other currencies makes life still harder for Switzerland’s beleaguered exporters and the domestic tourism industry.
The SNB has been active in the foreign exchange markets, printing francs to buy euros, and swelling its own foreign currency reserves as a result. The latest monthly figures published earlier this month showed this figure rising from CHF587.6 billion ($609 billion) to a record CHF602.1 billion.
SNB chairman Thomas Jordan said on Thursday that the franc was still significantly over-valued against other currencies.
The SNB expects negative inflation of -0.4% this year, moving into positive territory (+0.3%) in 2017 and +0.9% in 2018.
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