MNI PREVIEW: SNB To Restate FX Intervention Willingness

--Franc No Longer Appreciating

--Rates Set To Be Kept On Hold

By Luke Heighton

     FRANKFURT(MNI) - The Swiss National Bank is set at its meeting on Thursday

to reaffirm its willingness to intervene to prevent appreciation of the franc,

which Governor Thomas Jordan described as "even more highly valued" in March,

but it is likely to keep interest rates on hold at negative levels amid hopes of

economic recovery.

     Jordan's remarks March 19, including the comment that the SNB was

intervening "more strongly" in the foreign exchange markets, coincided with an

interruption to months of franc strengthening, although fears of a second wave

of coronavirus infections may keep alive concerns over possible renewed

appreciation.

     In response to the Covid-19 crisis, between March 19-25 the SNB raised the

negative rate exemption threshold and deactivated the counter-cyclical capital

buffer to give banks breathing space, and announced the creation of a

refinancing facility at the -0.75% policy rate.

     --BALANCE SHEET

     The success of its measures will be partially visible on June 22, when the

Bank publishes its latest round of economic data. But with signs of greater

coordination between the European Central Bank and the European Commission to

revive the eurozone, impetus for further action has dissipated. Jordan indicated

last month that the SNB will only continue to expand its balance sheet so long

as the benefits outweigh the costs, though he has reiterated that there is still

"room for manoeuvre" when it comes to cutting rates.

     Switzerland is easing pandemic restrictions and reopening borders with

neighbouring countries, raising hopes of the beginning of a recovery. Core

inflation fell to -0.6% in May, its lowest level in more than four years, with

official forecasts suggesting it will not return to positive territory until

early 2021 and only rise to 0.9% by Q4 2022.

     The SNB is comfortable with the current level of its gold reserves, Jordan

said recently, adding that it has "no intention to buy or sell gold, but that

can change over time."

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

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