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Switzerland Monetary Policy September 2021

Switzerland: SNB maintains ultra-loose monetary policy in June

At its meeting on 23 September, 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 in June–July has increased slightly, 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:

“We believe that nothing should be expected from the SNB until the European Central Bank starts to raise interest rates. Our house view is that this will not happen until the second half of 2023, at the earliest. Therefore, we do not expect any change in the SNB’s monetary policy until the end of 2024. In the next few years between now and then, the global economic situation is likely to change significantly, but the SNB will probably always remain at the same point: watch what others do and wait to act.”

The next monetary policy meeting is scheduled for 16 December.

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