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Free AccessMNI REVIEW: SNB Repeats Willingness To Intervene
The Swiss National Bank held its policy rate and interest on sight deposits at -0.75% Thursday, and reiterated its willingness to intervene "more strongly" in the foreign exchange market to protect the "highly valued" Swiss franc, a day after it was branded a currency manipulator in a U.S. Treasury report.
"The negative interest rate and our foreign exchange market interventions counter the upward pressure on the Swiss franc," the SNB said after the U.S. added Switzerland to its list of alleged currency manipulators in a semi-annual report on Wednesday. "This pressure is especially high in periods of uncertainty, and a strong appreciation would weigh particularly heavily on the economy in the crisis. We have therefore made considerable foreign exchange purchases this year to maintain appropriate monetary conditions."
The outlook remains subject to a high degree of uncertainty, with risks to the upside and downside alike, with unemployment set to rise, said SNB President Thomas Jordan.
"On the one hand, the pandemic or trade tensions could additionally hamper economic activity. On the other, the fiscal and monetary policy measures implemented could support the recovery more strongly than anticipated," Jordan said.
SECOND WAVE
Renewed deterioration in the economic outlook as a result of the Covid pandemic's second wave means the conditional inflation outlook to the end of 2021 is slightly lower than forecast in September, Jordan said.
Inflation is now expected to drop 0.1 percentage point to -0.7% in 2020. The forecast for 2021 was revised down 0.1 percentage point to 0.0%, before returning to positive territory (0.2%) in 2022 - as predicted in September.
GDP is expected to shrink by around 3% this year - some 2 percentage points less than anticipated in September - Jordan said. Assuming the virus is successfully contained locally and globally, he continued, the SNB expects GDP growth of 2.5% to 3% for 2021.
Switzerland's expansionary monetary policy had "proved its worth and remains necessary" during the coronavirus crisis, which is having a strongly adverse effect on the Swiss economy, Jordan said in introductory remarks to the press conference to announce the monetary policy assessment.
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