The Swiss National Bank left interest rates at a record low and maintained its pledge to intervene if needed to push back against pressure on the “significantly overvalued” franc.
Announcing its decision on Thursday, the SNB said its measures continue to help weaken the currency, which has been a weight on the economy, holding back growth and pushing down inflation. It maintained the rate on sight deposits at minus 0.75 percent, as forecast by 15 of 19 economists in a Bloomberg survey, and kept its target range for three-month Libor unchanged.
Credit Suisse responded by saying SNB President Thomas Jordan is being too optimistic on the outlook and should have cut rates to weaken the franc and boost demand. The SNB sees growth accelerating to 1.5 percent next year from just under 1 percent this year and said that headline Swiss data showing a third-quarter stagnation don’t tell the full story.
In its analysis, the central bank also said the global backdrop had deteriorated, but it’s “cautiously optimistic.” On its key Swiss inflation outlook, it expects consumer prices to fall 0.5 percent next year before rising in 2017, though by less than forecast in September.
“The SNB has missed an opportunity to show its determination to weaken the franc in lowering its deposit rate,” said Maxime Botteron, an analyst at Credit Suisse in Zurich. The growth forecast for 2016 will be “very difficult to achieve in the absence of any substantial depreciation,” he said.
In the buildup to the meeting, Jordan got some relief when new European Central Bank stimulus this month fell short of market expectations, sending the Swiss currency to a seven-week low versus the euro. That’s given him time to wait for a likely Federal Reserve rate increase next week, which could have global spillover effects.
“As long as the euro-franc exchange rate remains in a comfort zone of between 1.07 and 1.10 thanks to interventions, the SNB will probably hold off from additional interest-rate cuts,” said Dominik Studer, an analyst at UBS in Zurich.
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