...

SNB Keeps Ultra-Loose Stance With No Sign of Inflation Surge




  • In Business
  • 2021-09-23 07:59:17Z
  • By Bloomberg

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Most Read from Bloomberg

  • Istanbul Turns Taps on Old Fountains, Joining Global Push for Free Drinks

  • The Global Housing Market Is Broken, and It's Dividing Entire Countries

  • In Paris, the Wrapped Arc de Triomphe Is a Polarizing Package

  • How the Child Care Crisis Became a Global Economic Fiasco

  • Berlin Referendum Could Determine the Future of the City's Housing

The Swiss National Bank stuck with ultra-low interest rates in response to lingering risks to the economy from the pandemic and keep its "highly valued" currency in check.

Officials led by President Thomas Jordan, back at work after sick leave, also reiterated their pledge to use foreign-exchange interventions as needed. They kept both the deposit rate and the policy rate at -0.75%, a decision widely expected among economists.

Switzerland finds itself in something of a sweet spot because the economy is recovering apace without the flare up in consumer prices seen in other countries. While inflation has risen from its 2020 low, it's still forecast to remain below 1% through 2023.

The franc has depreciated against the euro amid the global economic recovery. It weakened a touch after the decision and was trading at 1.08389 per euro at 9:46 a.m. in Zurich.

Other central banks are in a different position when it comes to inflation. Policy makers in Norway may raise interest rates later on Thursday, while Federal Reserve Chair Jerome Powell said Wednesday the U.S. central bank could begin scaling back asset purchases in November.

Despite a buoyant recovery and low unemployment, the SNB is reluctant to raise what's currently the world's lowest benchmark interest rate because that could boost the haven franc and drive down inflation. Over the past decade, the SNB has spent hundreds of billions of francs on interventions.

It sees the economy growing about 3% this year, compared with roughly 3.5% expected in June.

"The current solid growth momentum is thus expected to continue in the coming quarters," it said. GDP will regain its pre-crisis level in the second half of 2020, though the central bank noted the outlook is highly uncertain.

A byproduct of the SNB's loose policy has been a worsening of property market imbalances. Lending got a boost when during the early days of the pandemic when Swiss officials deactivated a countercyclical capital buffer for banks' mortgage assets to prevent a credit crunch.

The SNB said Thursday vulnerabilities had increased further but stopped short of calling for a reactivating of the buffer.

According to some measures, housing is overvalued by as much as 30%.

"The SNB hasn't changed its stance and communication -- which isn't surprising," said UBS Group AG Economist Alessandro Bee. "If there was a surprise, it's that they didn't change their wording on the franc and on the real estate market."

(Updates with market reaction, quotes from fourth paragraph.)

Most Read from Bloomberg Businessweek

  • Evergrande Debt Crisis Is Financial Stress Test No One Wanted

  • In Amazon's Flagship Fulfillment Center, the Machines Run the Show

  • Microsoft and an Army of Tiny Telecoms Are Part of a Plan to Wire Rural America

  • A Tiny Piece of Plastic Is Helping Farmers Use Far Less Water

  • Germany's Industrial Giants Confront Their Mortality on Election Eve

©2021 Bloomberg L.P.

COMMENTS

More Related News

Snap
Snap's Record Rout Leads $142 Billion Social-Media Selloff

(Bloomberg) -- Snap Inc. posted its biggest one-day drop on record after the Snapchat parent company warned that Apple Inc.'s data collection rules and...

Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut
Second U.S. Bitcoin Futures ETF Makes Lower-Profile Debut

(Bloomberg) -- Most Read from BloombergThe Top Money Maker at Deutsche Bank Reaps Billions From SingaporeWhy Americans and Britons Are Rushing to Buy Idyllic...

Tesla Shares Reach New Heights as Earnings Supercharge Rally
Tesla Shares Reach New Heights as Earnings Supercharge Rally

(Bloomberg) -- Tesla Inc. shares rallied to a record high on Friday, taking the electric-vehicle maker another step closer to joining an elite group of...

Intel
Intel's 12% Slide Erases More Than $26 Billion From Market Value

(Bloomberg) -- Intel Corp. shares plummeted to their lowest close since December on Friday, after the chipmaker reported third-quarter results and detailed a...

Bitcoin
Bitcoin's Record-Breaking Week Is Ending With a Whimper

(Bloomberg) -- Bitcoin's record-breaking week ended on a down note.Most Read from BloombergThe Top Money Maker at Deutsche Bank Reaps Billions From...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business