ZURICH (Reuters) - The Swiss National Bank will maintain its expansive monetary policy when it gives its latest update on Thursday, according to a Reuters poll, as the Swiss wait for the European Central Bank to call time on its stimulus program.
All 35 economists questioned by Reuters said the central bank would keep its target range for the benchmark interest rate at minus 1.25 percent to minus 0.25 percent. None of them predicted a change until December at the earliest.
Respondents also expected the SNB to keep its negative rate of 0.75 percent on sight deposits, one tool it has used over the past three years to reduce the franc currency’s attractiveness.
SNB Chairman Thomas Jordan will not want to jeopardize a recent weakening of the Swiss franc and is instead likely to wait for the ECB to tighten its monetary policy before he alters the SNB’s course.
The ECB took a further baby step last week towards ending its stimulus package, dropping a long-standing pledge to increase bond buying if necessary. [nL5N1QQ1WR]
But ECB President Mario Draghi would have to go further and start increasing the ECB’s interest rates before the SNB did the same, most analysts said.
The SNB will change its policy “either when the ECB starts to increase its interest rates or if the euro-franc exchange rate weakens materially towards 1.25” said Maxime Botteron, an economist at Credit Suisse.
On Tuesday, the franc was trading around 1.17 versus the euro EURCHF=.
The SNB has had negative interest rates in place since January 2015, when the central bank upended currency markets by ditching its policy of pegging the franc at 1.20 per euro.
The resulting rapid rise in the Swiss franc, dubbed the “Frankenshock” in Switzerland, has now been largely overcome, the government said earlier this month. [nL8N1QJ31L]
But a highly-valued franc remains a risk to the export-reliant economy by making Swiss products more expensive in the euro zone — its main export market — and reducing the profitability of Swiss companies.
As well as negative interest rates, economists polled by Reuters between March 9-13 expect the SNB to continue to use verbal interventions to head off currency appreciation.
Last September, the central bank changed its description of the franc from “significantly overvalued” to “highly valued”, a description analysts expect the bank to maintain in its communication on Thursday.
“The franc is roughly in line with where it was prior to the December meeting,” said Jessica Hinds, an analyst at Capital Economics.
“And given the appreciation of the franc against the euro in late January, we suspect that it [the SNB] won’t want to risk further franc strength by toning down its language.”
Polling by Vivek Mishra and Manjul Paul; Editing by Jonathan Cable and Catherine Evans