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Switzerland Monetary Policy June 2021

Switzerland: SNB maintains ultra-loose monetary policy in June

At its meeting on 17 June, 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 reiterated its continued willingness to intervene in foreign exchange markets “as necessary” to temper the value of the franc.

The Bank’s move was aimed at shoring up economic activity in the face of the ongoing Covid-19 pandemic, avoiding unwanted appreciation of the Swiss franc, and boosting price pressures—while inflation returned in April, it is still muted, and the SNB’s latest forecasts are still for inflation to average below 1.0% this year and next.

Looking ahead, the SNB is expected to maintain its extremely expansionary stance for a prolonged period in the face of depressed price pressures. Moreover, currency intervention is set to continue as and when required in order to tame any strengthening of the franc.

According to Peter Vanden Houte, economist at ING:

“With the positive, but cautious outlook and inflation remaining below 1.0% for some time to come a change in monetary policy doesn’t seem to be needed anytime soon. In any case, we don’t see the Central Bank moving before the ECB. As in the Eurozone, a change in interest rates is not to be expected before H2 2023, we don’t expect the SNB to raise interest rates before 2024.”

The next monetary policy meeting is scheduled for 23 September.

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