MNI PREVIEW: SNB To Stand Pat As Global Outlook Darkens

By Luke Heighton

     FRANKFURT(MNI) - The Swiss National Bank is unlikely to adjust key interest

rates when it meets on Thursday, but faces challenges as international disputes

depress the local outlook.

     Chairman Thomas Jordan has in recent months dismissed calls for benchmark

rates to return to positive territory, and instead suggested they could go

lower, amid subdued inflation and ongoing eurozone fragility.

     March 2019 saw the SNB cut its conditional inflation forecast by 0.2

percentage point on its December 2018 estimate to 0.3%, based on "weaker than

generally anticipated" conditions, while 2020 expectations fell from 1.0% to

0.6%. The forecast for 2021 was 1.2%. There may be a small rise in 2019 as a

result of energy adjustments, but the medium-term trend is downwards.

     Last week's ECB decision to push out its forward guidance to the second

half of 2020 means a reactive rate cut by the SNB isn't out of the question, but

it would be a dovish surprise. More likely the bank will opt to wait and see.

     The SNB has repeated assertions that it has the tools to react should the

economic situation deteriorate further, including an expansion of its balance

sheet, and a return to asset purchases is very much 'in the air' following Mario

Draghi's remarks in Vilnius. That, too, seems somewhat remote, but Jordan may

well face questions from journalists on the subject.

     Attention is likely to focus on a possible tweak to the language used to

describe the already "highly valued" Swiss franc, and any suggestion that the

bank may be edging closer to direct intervention to shield the currency from

excessive inflows. Jordan may decide things have become "more fragile",

"volatile", or "disorderly."

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

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