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Free AccessSTATE OF PLAY: SNB Changes FX Wording, But Not Strategy
The Swiss National Bank dropped its commitment to intervene "more strongly" in FX markets from its March policy statement, but chairman Thomas Jordan said there had been "absolutely no change" in monetary policy, and the bank's willingness to intervene was "exactly the same."
The SNB remains willing to intervene in the foreign exchange market as necessary, despite the 'highly valued' franc's recent weakening, it said Thursday, while leaving the benchmark policy rate and interest paid on sight deposits unchanged at -0.75%.
Jordan welcomed the slight depreciation of the Swiss franc in recent weeks, but said today's assessment included "no signalling at all for a change of monetary policy for the time being."
FORECASTS
The SNB's inflation forecast was raised from 0.0% to 0.2% for 2021, from 0.2% to 0.4% for 2022 and 0.5% for 2023. As in December 2020, the SNB expects GDP growth of 2.5% to 3% for 2021. Jordan attributed the change due to a smaller-than-expected decrease in GDP resulting from the first wave of the Covid pandemic, Jordan said, though both the inflation outlook and the growth forecasts for Switzerland and abroad remain subject to high uncertainty.
"Developments going forward largely depend on how successfully the spread of the virus can be contained in Switzerland and abroad," he told journalists. "The SNB's assumption is that there will not be a significant easing in the containment measures in Switzerland until the spring."
Upside and downside risks exist, Jordan said, citing the pandemic or trade tension on the one hand, and the possibility that fiscal and monetary policy measures could support the recovery more strongly than anticipated on the other.
However, the SNB would need to see "much higher" inflation forecasts, a closing of the output gap and stronger inflationary pressure before it would consider a policy change, he said, with the current expansionary regime still "absolutely necessary" to maintain price stability at a time when inflation is still slightly negative.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.