* SNB maintains its ultra-loose monetary policy
* Central bank trying to weaken Swiss franc
* Interest rate on sight deposits unchanged at -0.75 pct
* Three-month Swiss franc LIBOR at -1.25 pct to -0.25 pct
* Keeps 2017 Swiss growth forecast, trims 2018/19 inflation
(Recasts, adds quotes from news conference, previous ZURICH)
By Silke Koltrowitz and Angelika Gruber
BERN, June 15 The Swiss National Bank said on
Thursday reducing its huge balance sheet was not on the agenda
as political and economic risks had not yet eased sufficiently
for it to move away from its ultra-loose monetary policy.
The dovish tone signalled the Swiss central bank was nowhere
close to tightening policy as it tries to keep a lid on the
strong Swiss franc that is weighing on the export-led economy.
Asked if the SNB was considering trimming a balance sheet
bloated by currency interventions, Chairman Thomas Jordan told a
media conference: "That is not an issue. Our monetary policy
remains expansionary for the reasons we’ve given, namely low
inflation, underutilisation of production capacities and a
significantly overvalued franc."
The U.S. Federal Reserve in contrast plans to shrink its
$4.5-trillion portfolio. It mapped out on Wednesday a very
gradual approach to shedding assets.
The SNB's leeway has been limited by the European Central
Bank's massive bond-buying programme, which has weakened the
value of the euro.
UBS economist Alessandro Bee said he expected the ECB to
announce in the second half of the year that it will start
scaling back asset purchases in 2018.
"The bit more hawkish monetary stance by the ECB should give
the SNB some monetary leeway in coming quarters. We first expect
the SNB to keep monetary policy unchanged and to let the franc
weaken. Only in June 2018 the SNB may use this monetary leeway
to rise interest rate once," Bee said.
The SNB kept its target for three-month LIBOR at -1.25
percent to -0.25 percent and the rate on sight deposits at -0.75
percent as expected in a Reuters poll.
It kept its 2017 inflation forecast of 0.3 percent but
trimmed its 2018 outlook to 0.3 percent from 0.4 and its 2019
forecast to 1.0 percent from 1.1.
It has kept rates frozen since it abandoned its cap on the
franc versus the euro two and a half years ago, which
sent the franc soaring against the single currency.
Jordan did not rule out cutting interest rates further if
needed and said the SNB could also use currency interventions to
weaken the franc.
The SNB has bought more than 47 billion Swiss francs ($48.4
billion) of foreign currency this year, although the amounts
have been scaled back in recent weeks.
Jordan said the global economy was strengthening and labour
markets were picking up while inflation remained surprisingly
modest in most advanced economies.
"In our baseline scenario, we expect monetary policy to
normalise further in the United States, obviously depending on
the economic development there, and to remain expansionary in
Europe. Europe is more important for us, of course," he said.
Jordan said political risks had diminished somewhat after
pro-Europe centrist Emmanuel Macron's election victory in
France, but had not gone away completely and could still lead to
upward pressure on the franc.
The SNB cited "considerable downside risks" to its baseline
scenario. It saw 1.5 percent Swiss economic growth this
($1 = 0.9717 Swiss francs)
(Additonal reporting by Joshua Franklin and John Revill in
Zurich; Editing by Michael Shields and Toby Chopra)