ZURICH, Sept 19 (Reuters) - The Swiss National Bank made the following statement after its policy review on Thursday:
The Swiss National Bank is keeping the SNB policy rate and interest on sight deposits at the SNB at −0.75%. It remains willing to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. Furthermore, the National Bank is adjusting the basis for calculating negative interest on sight deposits at the SNB.
The expansionary monetary policy continues to be necessary given the latest international developments and the inflation outlook in Switzerland. The situation on the foreign exchange market is still fragile, and the Swiss franc has appreciated in trade-weighted terms. It remains highly valued.
Negative interest and the willingness to intervene are important in order to counteract the attractiveness of Swiss franc investments and thus ease pressure on the currency. In this way, the SNB stabilises price developments and supports economic activity.
The SNB is adjusting the basis for calculating negative interest as follows. Negative interest will continue to be charged on the portion of banks’ sight deposits which exceeds a certain exemption threshold. However, this exemption threshold will now be updated monthly and thereby reflect developments in banks’ balance sheets over time.
This adjustment to the calculation basis takes account of the fact that the low interest rate environment around the world has recently become more entrenched and could persist for some time yet. The adjustment raises the exemption threshold for the banking system and reduces negative interest income for the SNB. The new exemption threshold calculation comes into effect on 1 November 2019.
The SNB regularly reviews the basis for calculating negative interest and adjusts it as necessary, in order to ensure room for manoeuvre in monetary policy going forward. The negative interest charge is to be limited to what is necessary, however. More information on the calculation of the exemption threshold can be found in the attached instruction sheet.
The new conditional inflation forecast is lower than in June. This is primarily due to weaker growth and inflation prospects abroad and the stronger Swiss franc. The forecast for the current year has been reduced slightly to 0.4%, from 0.6% in the previous quarter. For 2020, the SNB now expects an inflation rate of 0.2%, compared to 0.7% last quarter.
The inflation rate increases to 0.6% in 2021; in the previous quarter, a rise to 1.1% had been forecast. The conditional inflation forecast is based on the assumption that the SNB policy rate remains at –0.75% over the entire forecast horizon.