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$$$$,MX$$$$]