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.
For the second time this year, the Fed hiked interest rates, in a widely expected move that reflects the central bank’s confidence in the U.S. economy.
After two-day meeting on Wednesday, the Federal Reserve’s Open Market Committee raised their benchmark interest rate by 25 basis points to a range of 1% to 1.25%.
The move was essentially a foregone conclusion and the market was pricing in a 99% chance of a rate hike, according to CME Group’s FedWatch tool.
The Fed has murdered price discovery in the markets and has enlisted other central banks as henchmen. The SNB (Swiss National Bank) has bought millions of dollars worth of Apple stock, for example, and it remains to be seen what the central banks will do if the slight downturn of the last few days persists. They may all buy the dip.
European officials indicated on Monday that they had few hopes for a comprehensive agreement at Thursday’s Eurogroup that will pave the way for Greece to join the European Central Bank’s quantitative easing plan, despite a French push for a deal.
France’s economy minister, Bruno Le Maire, was in Athens Monday to discuss a proposal whereby relief measures for Greece’s mountainous debt would be strengthened when growth is weak and relaxed when growth is strong. However, he admitted that securing a deal would be “difficult and complex.”
The European Central Bank (ECB) left its benchmark interest rate unchanged on Thursday and dropped any reference to a future rate cut.
In a statement it said it expected interest rates to "remain at present levels for an extended period of time," but added that it would be ready to extend its quantitative easing (QE) program if needed.
The account of the Federal Reserve’s early May meeting, which the Fed published Wednesday, suggested the decision to raise interest rates in June still hangs in the balance.
“Members generally judged that it would be prudent to await additional evidence indicating that the recent slowdown in the pace of economic activity had been transitory before taking another step in removing accommodation,” the Fed said in an account, released after a standard three-week delay.
The Swiss National Bank (SNB) will maintain its ultra-loose monetary policy to help rein in the strong franc, Chairman Thomas Jordan Swiss told Italian-language newspaper Corriere del Ticino, published on Thursday.
"The overvalued franc, the underutilisation of production capacity and low inflation make it necessary for us to stick to our expansive monetary policy," Jordan said.
Jordan said "The franc is still overvalued, which is why negative interest rates and our readiness to intervene in the forex market remain necessary," he explained.
The Swiss National Bank’s (SNB) policy of negative interest rates is not ideal but is nevertheless necessary in order to weaken Switzerland’s "significantly overvalued" currency, Chairman Thomas Jordan said on the sidelines of the Private Banking Day in Zurich on Thursday. "It’s not the case that we find it great to have negative interest rates," Jordan said during conference.
However, Jordan said negative interest rates, along with the central bank’s willingness to intervene in the currency were absolutely necessary in order to protect exporters from a stronger Swiss franc, which is a safe-haven currency in times of market stress. Those conditions will largely be dictated from abroad, particularly by the European Central Bank (ECB). He stressed Swiss monetary policy was a hostage to weak economic conditions in some EU states, which prompted the ECB to print trillions of euros and move euro interest rates into negative territory.
