MNI BRIEF: SNB Holds Rates, Changes FX Guidance Amid Slowdown

The SNB kept its benchmark policy rate unchanged at 1.75% Thursday, and said it remains willing to be active in the foreign exchange market as necessary -- dropping its previous focus on selling foreign currency and its reference to further rate hikes.

Inflation is likely to increase again somewhat in the coming months, the statement said. Yet unlike in September, it did not say that more hikes cannot be ruled out. Rather, with inflation declining “significantly” in many countries over the past few months, “monetary policy is likely to remain restrictive in many countries for the time being.” Inflation was at 1.4% in November, with the conditional forecast revised downwards to within the 0-2% over the medium term. Average annual inflation is now seen at 2.1% for 2023, 1.9% for 2024 and 1.6% for 2025.

Economic growth is expected to be around 1% this year, slipping to 0.5% and 1% in 2024, leading to a gradual rise in unemployment. The forecast is subject to high uncertainty, the SNB said, with the main risk a more pronounced economic slowdown abroad.