MNI PREVIEW: SNB To Hold, Reiterate FX Intervention Readiness

By Luke Heighton

     FRANKFURT(MNI) - The Swiss National Bank is expected to keep its policy

rate and interest on sight deposits unchanged on Thursday and to reiterate its

readiness to intervene in the currency markets "as necessary."

     While interest rate cuts even further into negative territory cannot be

ruled out in 2020, the SNB is unlikely to deviate from September's monetary

policy assessment and will hold the deposit rate at -0.75%, as it emphasises the

need to maintain loose monetary policy alongside the mitigating effects of

tiering.

     Autumn saw Chairman Thomas Jordan announce that the conditional inflation

outlook had been revised down since June, due primarily to weaker growth and

inflation prospects abroad and the continued appreciation of the franc. The

forecast for 2019 fell slightly, from 0.6% in the previous quarter to 0.4%, with

the SNB now expecting an inflation rate of 0.2% in 2020, compared with 0.7% the

previous quarter, rising to 0.6% in 2021 - a cut from the 1.1% previously

foreseen. While signs of improvement in the European data may offer some

encouragement, risks remain tilted to the downside, and there is little reason

to think any major upwards revisions are in prospect.

     Last time, Jordan described the franc as "highly valued," and the situation

in the foreign exchange markets as "fragile.

     The SNB could indicate its willingness to adopt something of a

'wait-and-see' strategy, as it chews over the implications of a UK general

election, the prospects of a cooling of the trade dispute between the US and

China, and the impact of a new ECB boss in Frankfurt.

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

[TOPICS: MT$$$$,MX$$$$]