Swiss National Bank Keeps Negative 0.75% Interest Rate

March 15, 2018

In mid-January 2015, the Swiss National Bank discontinued its intervention-enforced minimum exchange rate target of 1.2000 per euro but at the same time lowered the sight deposit target by a half percentage point to -0.75% and the 3-month Swiss Libor target range to -1.25% to -0.25% (from -0.75% to +0.25%). Equally important, monetary officials promised to keep monitoring foreign exchange developments closely and to intervene forcefully as deemed necessary. It’s been the official view ever since that the franc is inappropriately overvalued and that further appreciation would be harmful. Inflation got as low as negative 1.4% in the second half of 2015 and did not move above zero until early 2017. In a released statement after the latest quarterly review, officials retained the elements of the 3-year-old policy stance and slightly revised their future projected inflation path downward. They now do not expect on-year CPI inflation to reach 1.0% until the third quarter of 2019 and 2.0% until a year after that.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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