‘2018 seems that it may be the year for the SNB to start normalizing policy’. – Nadia Gharbi, Pictet & Cie
As expected, the Swiss National Bank left its interest rates at historic lows at its monetary policy meeting on Thursday. To avoid further appreciation of the Swiss Franc, policymakers kept the deposit rate at -0.75%, in line with market forecasts. Moreover, the Central bank said it would intervene in the foreign exchange market if necessary, pointing to the ‘significantly overvalued’ Franc. However, The Swiss Franc traded little changed against the Euro this year but rose around 1.9% against the US Dollar. The Swiss Franc is highly expected to strengthen sharply against most rivals in the near future amid a high-risk aversion environment created by significant uncertainties coming from the upcoming European elections, Donald Trump’s trade policies and Britain’s exit from the European Union. Earlier this week, The Prime Minister of the Netherlands Mark Rutte lost to its populist rival Geert Wilders during the parliamentary vote. His loss sent shockwaves across Europe, thus adding further uncertainties. In a statement, the SNB also pointed to improving inflation and revised up its 2017 inflation forecast to 0.3%, up from its December estimate of 0.1%. The pace of economic growth in Switzerland is likely to accelerate this year, according to the latest KOF Economic Barometer and PMI.
