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Reuters poll - Swiss National Bank expected to keep negative rates to 2018
December 14, 2016 / 11:31 AM / in 10 months

Reuters poll - Swiss National Bank expected to keep negative rates to 2018

ZURICH (Reuters) - The Swiss National Bank will keep its benchmark interest rate at its current record-low into 2018, analysts polled by Reuters said ahead of the central bank’s quarterly monetary policy assessment on Thursday.

The Swiss central bank, confronted by an extended bond buying spree by the European Central Bank which is contributing to a weaker euro, is unlikely to depart from its negative interest rate strategy designed to weaken the Swiss franc.

German, French and Dutch elections could also upend currency markets in 2017 and force the SNB to buy foreign currencies to weaken the safe-haven franc, like it did after Britain’s decision in June to leave the European Union and Donald Trump’s shock U.S. presidential election win in November.

“If there’s more uncertainty in Europe next year around the elections, I would expect the SNB to be active in the currency markets again,” said Alessandro Bee, an economist at UBS. “This is not an environment to risk increasing interest rates in Switzerland.”

All 34 analysts, polled by Reuters after the ECB extended its asset purchase programme last week, expect SNB Chairman Thomas Jordan to keep the target range for the benchmark 3-month LIBOR rate at -1.25 to -0.25 percent on Thursday.

And 13 of 14 analysts expect the bank to hold the rate at least until the second quarter of 2018, the end of the forecast horizon. All but one expect the SNB to keep its sight deposit rate at -0.75 percent at least until 2018.

Negative interest rates were introduced in January 2015 after the SNB scrapped a longstanding cap on the Swiss franc versus the euro, with the intention of making franc investments less attractive.

The SNB has also been supporting the policy by intervening in currency markets, buying euros with francs to weaken the currency which has soared in value since it abandoned its policy of limiting the franc to 1.20 versus the euro.

Maxime Botteron, an economist at Credit Suisse, said he did not expect the SNB to raise its policy rate before the ECB, which is “something we don’t see before 2019 or even later”.

Not damaging the recovery of the Swiss economy will be among the SNB’s considerations he said.

“The Swiss economy is doing ok, and can tolerate a stronger franc,” Botteron said. “But the SNB doesn’t want to risk that by increasing interest rates which could lead to more of an increase in the franc which could damage the Swiss economic recovery.”

Polling by Kailash Bathija; Editing by Alison Williams

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