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Swiss central bank maintains negative interest rates and inflation is expected to exceed the target

2017-12-14 12:44 pm | Resource: NEWS | No Views : 408



The Swiss National Bank (SNB) maintained its expansionary stance on monetary policy on Thursday and reaffirmed its commitment to remain active in the foreign exchange market when necessary, although the franc weakened against the euro and the US dollar. The bank also expects inflation to exceed its target within three years due to currency weakness.

The SNB deposit rate was maintained at -0.75 percent and Libor's three-month target range remained unchanged at 1.25 percent and 0.25 percent, the bank said in a statement. The bank said the franc was overvalued The Swiss continued to fall, but the Franc remains of high value. The devaluation of the Swiss franc reflects the fact that safe havens are currently less glamorous for investors.

However, the Swiss National Bank saw this development as fragile. Therefore, despite the easing of the situation, the negative interest rate and the willingness of the central bank to intervene in the foreign exchange market, if necessary, remain necessary. The bank said that the revaluation of the franc will continue to pose a threat to price and economic developments. Swiss National Bank President Thomas Jordan said that expansionary monetary policy Is still appropriate to support the recovery, thus ensuring price stability, taking into account economic developments.

Jessica Hinds, an economist at Capital Economics, said the Swiss National Bank would not want to raise interest rates until after the European Central Bank begins to normalize its austerity policy. The economist expects the SNB to look at how the ECB's tightening will progress before they follow Swiss interest rates are expected to remain in place until early 2020, and the Cove Institute said in its winter forecast released on Thursday that the negative interest rate will end slowly. The Research Center predicts an initial rise in long-term interest rates next year, and in 2019 a slow increase in short-term interest rates that are still negative, Cove predicted that the economy will grow by 2.3% in 2018 and 1.7% in 2019.

The recovery in the Swiss economy is expected to continue in the coming months, the central bank said. For 2018, the Swiss National Bank expected GDP growth of about 2 per cent, compared to 1 per cent in 2017, and the bank expects a 0.5 per cent rise instead of 0.4 per cent. For 2018, inflation expectations were revised to 0.7 percent after 0.4 percent, while forecasts for 2019 remained at 1.1 percent. Inflation is expected to rise to 2.1 percent in the third quarter of 2020, Of the central bank's target of less than 2 per cent.


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