MNI POLICY: SNB Holds Rates; Adjusts Tiering, Growth Outlook

By Luke Heighton

     FRANKFURT (MNI) - The Swiss National bank kept key interest rates unchanged

Thursday, but announced it will change the basis for calculating negative

interest on sight deposits.

     Interest on sight deposits remains at -0.75%, while the exemption threshold

will now be updated on a monthly basis, reflecting changes in banks' balance

sheets over time, an SNB statement read.

     The adjustment, which comes into effect on November 1 and reduces negative

interest income for the SNB, "takes account of the fact that the low interest

rate environment around the world has recently become more entrenched and could

persist for some time yet," the statement continued.

     The Swiss franc continued to be "highly valued, the SNB said, and the bank

"remains willing to intervene in the foreign exchange market as necessary." The

situation on the foreign exchange market "is still fragile."

     --FORECASTS

     The SNB revised down its June inflation forecast, from 0.6% to 0.4% in

2019, 0.7% to 0.2% in 2020, and from 1.1% to 0.6% in 2021.

     Global economic signals have deteriorated in recent months, the SNB added,

due to heightened trade tensions and political uncertainty which it warned

"could lead to renewed turbulence on the financial markets and a further

dampening of economic sentiment."

     Global growth has slowed and there are signs that manufacturing output has

been weakening, the bank noted, alongside subdued capital spending and a decline

in the global trade in goods. The statement referred to the fact that "various

central banks have adjusted their monetary policy stance and lowered their key

rates" in response.

     Over the short term, the bank said, international momentum is likely to be

"modest," before picking up again, "not least due to monetary easing measures.

Inflation is then expected to rise gradually."

     Switzerland's economy continues to grow at a "modest" rate, with labour

market developments remaining positive. The growth forecast was revised

downwards, from 1.5% in June to between 0.5% and 1.0%, reflecting a drop in the

GDP growth forecasts for H2 2018 and Q1 2019.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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