MNI POLICY: SNB Holds Rates Amid Drop In Inflation Outlook

By Luke Heighton

     BERN (MNI) - The Swiss National Bank kept its policy rate and the interest

rate on sight deposits on hold at -0.75% Thursday, saying that while the

inflation outlook was deteriorating, further easing of containment measures was

likely to spur growth.

     The most recent forecast is for inflation to be -0.7% in 2020, -0.2% in

2021, and 0.2% in 2022, Governor Thomas Jordan said. These are based on the

policy rate remaining unchanged, Jordan said in his opening remarks to the press

following the June monetary policy assessment.

     Jordan described the Swiss franc as "highly valued", having said in March

that it had become "even more highly valued." The SNB remains willing to

intervene "more strongly" in the foreign exchange market, SNB chairman Thomas

Jordan said, repeating language used on March 19.

     An expansionary monetary policy "remains necessary" to ensure appropriate

monetary conditions in Switzerland, he added. In March he had said that such a

stance was "more necessary than ever for ensuring appropriate monetary

conditions in Switzerland."

     The SNB anticipates that "further waves of infection" will be successfully

prevented, Jordan said, though demand is likely to remain moderate "for some

time," and the possibility of future waves, coupled with trade tensions, could

additionally impair economic activity.

     Swiss GDP fell 2.6% in Q1 2020. The decline is likely to be "even stronger"

in the second quarter, Jordan said, with signs of improvement tempered by the

expectation that the recovery will be only "partial [...] for the time being,

and GDP will not return quickly to its pre-crisis level." Overall, Jordan said,

GDP is likely to contract by around 6% this year, "the strongest decline since

the oil crisis in the 1970s."

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

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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