Swiss National Bank should rely on currency purchases to tame the franc: poll

ZURICH – The Swiss National Bank will resist the urge to change interest rates to tame a strengthening Swiss franc and instead rely on currency purchases, analysts polled by Reuters ahead of the central bank’s monetary policy decision say .

Although the Swissie hit its highest level against the euro since July 2015 in recent days, none of the 32 economists surveyed expected the SNB to cut policy rates from the current level of minus 0.75. % Thursday.

Economists say the negative rate no longer deters investors who instead bet on a further appreciation of the franc, while pushing rates deeper into negative territory would trigger strong opposition in Switzerland.

Instead, around 85% of economists expected the SNB to rely on currency purchases to slow the appreciation of the franc, either quietly or accompanied by louder verbal warnings to the market that it was ready. Act.

Almost all analysts – 11 of 12 who answered the question – said the SNB would wait until the European Central Bank started raising interest rates before following suit.

They also still expected the Bank to maintain its description of the franc as “highly valued” despite the recent appreciation of the currency, which was in part caused by rising inflation in the euro area.

“I think they will keep the wording as it is, describing the franc as highly valued, and also not change their policy on Thursday,” said Valentin Bissat, senior economist at Mirabaud.

“As long as the franc’s rise is based on fundamentals – such as interest rates and inflation differentials between Switzerland and the euro area, rather than safe haven flows and does not appreciate too quickly nor too strongly to affect economic activity in Switzerland, the SNB would agree with that. “

The Swiss economy was doing relatively well, reducing the need for the SNB to change course, added GianLuigi Mandruzzato, economist at EFG Bank.

“Although the franc has appreciated a lot against the euro, it takes two to dance. For one currency to be strong, like the franc in this case, the other – the euro – must be weaker. “, did he declare.

“The Swiss economy is doing well and managing supply bottlenecks better than others, while Swiss inflation is in the comfort zone of the SNB.”

While the SNB appeared to massively cut its currency purchases in recent weeks, there was little room for the central bank to lower interest rates, he added.

“Any further cuts would meet strong resistance from the public who fear it will be passed on to their savings accounts,” he said.

(Report by John Revill; poll by Swathi Nair and Sujith Pai; edited by Alison Williams) (([email protected]; +41 58 306 7022;))

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