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PREVIEW: SNB To Stay On Hold As Growth Slows,

By Luke Heighton 
     FRANKFURT (MNI) - Downside risks, slowing domestic growth and increasing
caution across the eurozone should see the Swiss National Bank maintain its
highly accommodative monetary policy position on Thursday.
     The SNB is expected to hold the deposit rate at -0.75% as it continues to
grapple with low inflation, the challenge of maintaining price stability,
fragile sentiment, and the ongoing threat of international trade tariffs.
     December 2018's monetary policy assessment saw inflation expectations for
2019 cut from 0.8% to 0.5%, while for 2020 the SNB anticipated inflation of
1.0%, compared with its previous forecast of 1.2%.
     This time around further downward revisions to GDP growth and inflation
projections - albeit less drastic than those recently announced by the ECB -
appear probable. GDP growth projections could be lowered from last year's
estimate of 1.5% to something closer to 1%.
     Governor Thomas Jordan is unlikely to have altered fundamentally his
assessment that the CHF is "highly valued" against the USD, and with little
change against the euro since the previous meeting the SNB will once again
stress its continued willingness to intervene on the currency markets. The
target range for the three-month Libor should also stay unchanged at between
-1.25% and -0.25%.
     As is the case with the European Central Bank, the SNB now faces questions
over what more it can do to positively influence inflation should the slowdown
continue. Unlike the ECB, one of the more straightforward responses (although a
political one, and therefore outside the bank's mandate), would be an
expansionary fiscal policy taking full advantage both of Switzerland's bulging
public purse and the ready availability of cheap debt.
     With such moves unlikely to transpire any time soon, the SNB will instead
seek to emphasise its readiness to react should the situation worsen.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: MT$$$$,MX$$$$]

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