MNI REVIEW: SNB Keeps Rates Unchanged, Cuts Inflation Outlook

By Luke Heighton

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

Thursday, citing global downside risks and trade tensions as it slightly

downgraded its conditional inflation forecast.

     The SNB policy rate and interest on sight deposits remains at -0.75%, while

the conditional inflation forecast now stands at 0.4% for 2019 (unchanged), 0.1%

for 2020 (-0.1%), and 0.5% for 2021 (-0.1%), assuming the policy rate remains at

its current level over the entire forecast horizon.

     As expected, Chairman Thomas Jordan described the Swiss franc as "highly

valued" and the situation in the foreign exchange markets as "fragile," while

reiterating that the bank "remains willing to intervene in the foreign exchange

market as necessary."

     Swiss GDP is likely to increase by around 1% in 2019, Jordan said, compared

with September's forecast of between 0.5% and 1%, rising to between 1.5% and 2%

in 2020. Jordan attributed the small increase to the "gradual firming expected

in global economic activity," as well as the exceptional effect of the revenue

generated by major international sporting events.

     Putting the SNB's accommodative stance in context, Jordan referred to the

fact that "various central banks eased their monetary policy in the autumn."

Moreover, he added, "they signalled that they would probably leave their policy

rates at a low level for an extended period of time."

     Trade tensions and the possibility of ongoing weakness in global

manufacturing activity remain the chief downside risks to the global economy, he

said.

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

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