SNB says significant overvaluation of CHF has been reduced

Author: Mike Paterson | Category: Central Banks

SNB statement out with the policy decision to leave rates on hold 14 Sept

  • Swiss franc nevertheless remains highly valued
  • situation on FX markets still fragile
  • SNB will remain active in the FX market
  • negative interest rate, willingness to intervene in FX remain essential in order to reduce attractiveness of swiss franc investments
  • will continue to monitor situation in mortgage and property markets
  • will regularly assess CCB
  • imbalances on mortgage, real estate markets persist

A small nod to the fact that EURCHF has rallied well over a period of time thanks in no small part to their smoothing but also a general EUR demand.

USDCHF however is a different kettle of fish and their caution/stance remains intact.

Says the SNB:

Since the last monetary policy assessment, the Swiss franc has weakened against the euro and appreciated against the dollar. Overall, this development is helping to reduce, to some extent, the significant overvaluation of the currency. The Swiss franc nevertheless remains highly valued, and the situation on the foreign exchange market is still fragile. The negative interest rate and the SNB's willingness to intervene in the foreign exchange market as necessary therefore remain essential in order to reduce the attractiveness of Swiss franc investments and thus ease pressure on the currency.

Owing to the exchange rate situation, the conditional inflation forecast has been revised upwards slightly compared to June. For the current year, the forecast has risen marginally to 0.4%, from 0.3% in the previous quarter. For 2018, too, the SNB anticipates an inflation rate of 0.4%, compared to 0.3% last quarter. For 2019, it now expects inflation of 1.1%, compared to 1.0% last quarter. The conditional inflation forecast is based on the assumption that the three-month Libor remains at -0.75% over the entire forecast horizon.

Full SNB report here

USDCHF 0.9638 and EURCHF 1.1462 both a tad softer but suitably unfazed by any of it.

                SNB not taking their foot off the gas anytime soon.

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