SNB keeps rates under control, looking at european elections

Following its latest quarterly policy meeting, the Swiss National Bank (SNB) made no changes in interest rates and it kept its target range for three-month Swiss franc Libor at -1.25% to -0.25% and the rate it charges on sight deposits at -0.75%.

Consensus forecasts were for an unchanged policy, although there had been some speculation that a shift could be sanctioned with a further rate cut. The SNB reiterated that the franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary.

The central bank is braced for the outcome of European elections this year which could trigger an upsurge in demand for the franc should nationalists perform well. "Chief among these are political uncertainty with respect to the future course of economic policy in the U.S., upcoming elections in Europe, and the complex exit negotiations between the UK and the EU," the central bank said in a statement.

In its quarterly policy assessment the SNB said the global economy remained subject to considerable risks. The policy mandate is to achieve price stability while also supporting economic activity.

In Switzerland, real GDP grew at an annualized pace of 0.3% in the third quarter of last year and growth was below expected in the fourth quarter. Expects recovery to continue.  SNB expects the growth to be 1.7% in 2017. According to the SNB’s assessment, imbalances on the mortgage and real estate markets persist.

Overall, the central bank will be hoping that a tighter Fed policy and an eventual ECB move away from an extremely accommodative policy will provide relief and alleviate upward pressure on the Swiss currency.