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Swiss Central Bank Retains Policy Rates As Expected

snb 031617 17jun21 lt

The Swiss National Bank decided to continue with its expansionary monetary policy in order to ensure price stability and support the ongoing economic recovery.

Policymakers of the central bank on Thursday decided to retain the policy rate and interest on sight deposits at the SNB at -0.75 percent.

The bank repeated that it is willing to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. The bank reiterated that the Swiss franc remains highly valued.

With the positive, but cautious outlook and inflation remaining below 1 percent for some time to come a change in monetary policy does not seem to be needed anytime soon, Peter Vanden Houte, an ING economist, said.

"In any case, we don't see the central bank moving before the European Central Bank," the economist said. As in the Eurozone, a change in interest rates is not be expected before the second half of 2023, SNB is not likely to raise interest rates before 2024.

Due to higher prices for oil products and tourism-related services, the SNB raised its near-term inflation outlook.

Consumer prices are forecast to rise 0.4 percent this year, up from the previous outlook of 0.2 percent. The projection for 2022 was raised to 0.6 percent from 0.4 percent.

For 2023, inflation is also seen at 0.6 percent compared to 0.5 percent projected in March.

As economic indicators improved significantly, GDP is forecast to show strong growth in the second quarter. The bank expects Swiss GDP to return to its pre-crisis level by the middle of the year.

The bank lifted its growth outlook for this year to around 3.5 percent citing the lower-than-expected decline in GDP in the first quarter. Earlier, the bank had forecast 2.5 percent to 3 percent economic growth for 2021.

Further, the SNB said mortgage lending and residential property prices increased strongly in recent quarters. Overall, the vulnerability of the mortgage and real estate markets has increased further.

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