Swiss National Bank: No rate hikes expected for a couple of years
Negative rates the new normal for the SNB
No, it's not a pipe. It's just SNB's Jordan's horn practise.
Thomas Jordan has said recently that the negative interest rates are set to remain an important instrument for years to come. The SNB spent over 2 billion CHF in currency intervention last year, but that was comparatively little to the 48 billion CHF spent in 2017. The interest rate at the SNB remains at -0.75% and even though the CHF has depreciated recently it is still described by the SNB as 'highly valued'.
The SNB has reduced its conditional inflation forecast and for 2019 it expects inflation levels of +0.3% vs its expectations of +0.6% in December and +0.9% 12 months ago. This downward revision has come due to lower growth forecasts, weaker inflation and changing expectations of global monetary policy. GDP forecasts from the SNB recognise that indicators have shown a slowdown in recent months. and predicts a growth of circa +1.5% in 2019.
The bottom line is that the SNB looks stuck with negative rates for the next year at least. If the slowdown is more pronounced the SNB could always go back to higher FX intervention levels, but I guess most of us hope they don't go down that route again. What could possibly go wrong, eh?