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SNB Cutting Rates to Shield Economy

SNB Cutting Rates to Shield EconomySNB Cutting Rates to Shield Economy

The Swiss National Bank (SNB) will cut interest rates again in an effort to head off economic damage from the franc’s surge after scrapping its currency cap, according to a survey.

Twenty-six of 28 economists in Bloomberg’s monthly survey forecast that SNB will loosen policy if the economy weakens following its shock decision to give up the franc ceiling in January. Forecasts collected by Bloomberg show a gloomier outlook with growth expected to slow through June of this year. Twenty-two of the respondents see the SNB cutting the rate on sight deposits, currently at minus 0.75 percent, in tandem with a reduction in the benchmark interest rate.

SNB President Thomas Jordan, who has indicated that there’s room for a further rate cut, predicts that Swiss economic growth will lose pace, and the economy may even shrink in one quarter. Economists in the survey share that view, forecasting a contraction in the three months through June.

“Switzerland has to avoid an all-out sharp recession and deflation,” said Janwillem Acket, chief economist at Julius Baer Ltd. in Zurich, who predicts growth of at least 0.3 percent every quarter this year. At the same time, Acket argues that the deposit rate could go as low as minus 5 percent.

“Never say never – we live in times where nothing is impossible,” he said.

SNB officials are scheduled to publish a new economic forecast at their next monetary policy review on March 19. In an unusual move, policy makers will also brief the press that day, which the SNB said had been decided upon owing to decision to give up the cap and introduce negative rates.

 

Financialtribune.com