SNB Holds Cash Rates Steady, Signals Economic Improvement

Ibeth Rivero

Swiss National BankThe Swiss National Bank announced its decision to leave the cash rates unchanged, in the negative territory, at 0.75 percent.

In its statement, the bank claimed that the Swiss Franc is highly valued which makes the bank ready to step into the Foreign Exchange market to make an intervention if necessary. Its long- term inflation forecast remained unchanged, while this year's forecast remained in the negative territory at -0.6 percent. The inflation level is expected to be at  0.1 percent in 2021, and to rise to 0.2 percent in 2022.

The bank insisted on keeping an expansionary monetary policy given the influence of the coronavirus outbreak into the Swiss and the world economic situation. Switzerland is now amid an economic recession, as the GDP contracted by 10 percent in the second quarter. In the same way, the world's economy went down between 10–20% according to the bank's estimations.

Nevertheless, the bank expects the world economy to recover in the third quarter, and the Swiss economy should also follow this trend according to the bank's projections.

"This baseline scenario is subject to a high degree of uncertainty. On the one hand, a rapid increase in infections could necessitate renewed containment measures, which would once again weigh heavily on the economy," commented the bank in its assessment, adding that other situations could hamper the economic situation, such as the surge of trade tensions. 

The bank also highlighted that despite the risks, there is still a chance that the measures introduced by other countries could support the economic recovery more strongly than expected.

This year, the Swiss economy is expected to contract by 5 percent, the worst contraction since the crisis in the mid-1970s.

By 10:31 GMT the Swiss Franc dropped against the US dollar by 0.14 percent, hitting the 1.0805 level.

Ibeth Rivero

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.

Did you like what you read? Let us know what you think!

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.