MNI STATE OF PLAY: SNB Holds Rates As Growth Slips

The Swiss National Bank reiterated its commitment to maintaining an expansionary stance in response to high levels of pandemic-related uncertainty, persistently low inflation and a negative output gap in its quarterly monetary policy assessment Thursday, keeping its policy rate unchanged at -0.75% while cutting the growth forecast for 2021.

Chairman Thomas Jordan, returning from heart surgery last month, stressed the SNB's ongoing willingness to intervene in foreign exchange markets in case of upward pressure on the highly-valued Swiss franc. Pointing to recent signs of increased vulnerability in the Swiss real estate and mortgage markets, he noted that the SNB regularly assesses whether to reactive countercyclical capital buffers.

DOWNWARD RISKS

September's medium-term inflation projections were almost unchanged compared with June, standing at 0.5% for 2021, 0.7% for 2022, and 0.6% for 2023. Growth expectations for this year were cut from 3.5% to 3.0%, with consumer-related industries such as hospitality performing less well than expected. However, Jordan confirmed that GDP is likely to return to its pre-crisis level in the second half of 2021.

Downside risks to the economic outlook stem primarily from the possibility of a resurgence in domestic and international Covid-19 infections leading to the reimposition of lockdown conditions, Jordan said.

Asked what implications moves by the Federal Reserve and the European Central Bank to scale back pandemic-related bond-buying operations might have for Swiss monetary policy, Jordan said any sign of global normalisation was good for the SNB, but that currency, inflation and output-gap considerations meant a change in direction is not yet warranted.