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Switzerland Monetary Policy December 2020

Switzerland: SNB maintains ultra-loose monetary policy in December

At its meeting on 17 December, the Swiss National Bank (SNB) left its policy rate and the interest rate on sight deposits at minus 0.75%—the world’s lowest. Moreover, the Bank highlighted its continued willingness to intervene strongly in foreign exchange markets as the Swiss franc remains highly valued.

The Bank’s move was aimed at shoring up economic activity in the face of the ongoing Covid-19 pandemic, avoiding an excessively strong Swiss franc, and boosting price pressures—consumer prices fell in November in annual terms for the tenth straight month. The SNB revised down its inflation forecast for 2021, and now expects consumer prices to be unchanged year-on-year (September meeting: +0.1% year-on-year).

Looking ahead, the SNB is expected to maintain its extremely expansionary stance for a prolonged period in the face of depressed price pressures. Currency intervention is also set to continue as and when required. The U.S.’ recent decision to brand Switzerland a currency manipulator is unlikely to change the Bank’s approach in this regard: The incoming Biden administration is expected to take a more lenient view on the matter than Trump, while the SNB sees FX interventions as a vital tool to conduct monetary policy.

The next monetary policy meeting is scheduled for 25 March.

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