SNB maintained its policy: no change rates in June

The Swiss National Bank kept interest rates unchanged at record lows, citing the strong currency and an absence of price pressures and the SNB held its deposit rate at -0.75%. It also affirmed its commitment to wage currency market interventions and reiterated that the franc was “significantly overvalued.” Consensus forecasts were for an unchanged policy.

“The SNB anticipates that economic developments will remain favorable,” it said in a statement ahead of press conference in Bern that will feature SNB President Thomas Jordan and his fellow governing board members. “The cautiously optimistic baseline scenario continues to be subject to considerable downside risks; this is due to political uncertainty and structural problems in a number of advanced economies.”

The SNB reiterated that the franc is still significantly overvalued and that it would remain active in the foreign exchange market as necessary, the same rhetoric as seen at the previous meeting. The central bank’s foreign exchange reserves hit a record high in May at 696bn francs($717bn). Policymakers repeated they would remain “active” in the Forex markets. The franc has weakened around 2% against the euro this year.

The SNB’s policy mandate is to achieve price stability while also supporting economic activity. Negative rates and intervention are aimed at making Swiss investments less attractive in order to ease upward pressure on the currency.

The 2017 inflation forecast was unchanged at 0.3% while the 2018 forecast was cut slightly to 0.3% from 0.4%. The 2019 CPI inflation forecast was also cut slightly to 1.0% from 1.1% previously.