Interest Rate in Switzerland
Switzerland - Interest Rate
SNB leaves ultra-loose monetary policy in place in September
At its meeting on 19 September, the Swiss National Bank (SNB) maintained its current expansionary policy stance as widely expected by market analysts. The Bank left the SNB policy rate set at minus 0.75%, and subsequently kept the interest rate on sight deposits also unchanged at minus 0.75%.
The SNB remains between a rock and a hard place in its monetary stance. Safe-haven demand for the Swiss franc has been strong amid a very uncertain global climate and the ongoing U.S.-China trade conflict. The Bank continues to deem the franc to be highly valued and the foreign exchange market as “fragile”. Consequently, the SNB considers a continuation of the record-low interest rates and market intervention as necessary to curb the attractiveness of assets denominated in francs and to avoid a sharp appreciation of the currency. The strong Swiss franc has kept inflationary pressures relatively absent and the Bank lowered its inflation forecasts for 2019 and 2020 to 0.4% and 0.2%, respectively (June forecasts: 2019: 0.6%; 2020: 0.7%). Meanwhile, economic momentum waned notably in the first half of the year, weighed on by the adverse external environment. SNB now expects growth of between 0.5% and 1.0% for 2019 (June forecast: +1.5%).
These developments paired with the ECB’s latest monetary stimulus package leave the SNB with little room to raise rates. The majority of FocusEconomics panelists see the Bank stuck in its ultra-accommodative monetary stance this year as well as next, and also expect the Bank to ramp up currency intervention.
Despite the ECB’s recent rate cut, the majority of our panelists do not foresee the SNB diving further into negative territory in its trails, as Maxime Botteron from Credit Suisse notes:
“We consider lowering the policy rate deeper into negative territory to be a bold step for an economy that we expect to grow near its potential, where inflation has been positive for 2.5 years and the unemployment rate has fallen to 2.3%.”
That said, some panelists noted that severe pressure on the CHF and the resulting deflationary pressures could force the Bank to consider additional easing as ING economist Charlotte de Montpellier explains:
“Since August, there is evidence that the Swiss central bank intervenes regularly in the foreign exchange market. In fact, this is the first thing the SNB does when the CHF appreciates too much. If the franc strengthens further due to a more accommodative monetary policy by the ECB and a rise in global uncertainty, the SNB may need to implement other measures, including a rate cut.”
Analysts at UniCredit expressed similar sentiment, stating:
“We expect the SNB to remain on hold, with the policy rate at -0.75%. […] If there is further upward pressure on the CHF, we think that the SNB is likely to intervene more strongly on FX markets. The recent announcement of open-ended asset purchases by the ECB also argues for the SNB adopting a wait-and-see strategy. Only if the CHF strengthens significantly and (core) inflation falls below zero (currently somewhat below ½% yoy), might a further rate cut be considered.”
The next monetary policy meeting is scheduled for 12 December 2019.
Last month, the majority of FocusEconomics Consensus Forecast panelists saw the SNB policy rate on hold for the remainder of this year and next, ending 2019 at minus 0.79% and ending 2020 also at minus 0.79%. Updated forecasts will be released 23 September.
Switzerland - Interest Rate Data
|Policy Interest Rate (%)||0.13||-0.25||-0.75||-0.75||-0.75|
5 years of economic forecasts for more than 30 economic indicators.
Switzerland Interest Rate Chart
Source: Swiss National Bank.
|Bond Yield||-0.51||6.27 %||Jan 01|
|Exchange Rate||0.97||-0.54 %||Jan 01|
Get a sample report showing our regional, country and commodities data and analysis.
Request a Trial
Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.
January 9, 2020
Calendar-adjusted real retail sales were flat in annual terms in November, down from October’s revised 0.4% reading (previously reported: +0.7% year-on-year).
January 7, 2020
Consumer prices were unchanged in month-on-month terms in December, following November’s 0.1% dip, with lower prices for clothing and footwear offsetting higher communications prices. Consumer prices rose 0.2% in annual terms in December, coming after consecutive annual price falls in October and November, while core inflation clocked 0.4%.
January 3, 2020
The manufacturing Purchasing Managers’ Index (PMI) produced by Credit Suisse and procure.ch rose to 50.2 in December from 48.8 in November, marking the highest reading since March and moving back above the 50-threshold that separates contraction from expansion in the manufacturing sector.
December 30, 2019
The KOF economic barometer—a leading composite indicator for the Swiss economy—rebounded to 96.4 points in December from November’s revised 92.6 points (previously reported: 93.0 points).
December 3, 2019
Consumer prices fell by 0.1% in November, following a 0.2% dip in October.