SNB Steps Up Interventions and Cuts Banks Slack on Negative Rate

SNB Steps Up Interventions and Cuts Banks Slack on Negative Rate

Bloomberg  | Mar 19, 2020 17:50

SNB Steps Up Interventions and Cuts Banks Slack on Negative Rate

(Bloomberg) --

The Swiss National Bank is stepping up currency interventions to stem the franc's advance, choosing that measure over an interest-rate cut to combat the economic fallout from the coronavirus outbreak.

It said the virus poses “exceptionally large challenges” and that the currency is “even more highly valued.” That change to its wording on the franc is a warning to markets that it will more aggressively push back against unwarranted appreciation.

It kept its deposit rate at -0.75% and said its exceptionally loose policy is now even more necessary. Although the Swiss financial system has “sufficient liquidity,” the SNB nevertheless reduced the negative interest rate burden for banks.

As of April 1, the exemption threshold factor will be increased to 30 from 25.

The franc weakened slightly after the SNB’s announcement, but then reversed and stood at 1.05502 per euro by 10:26 a.m. in Zurich. It’s strengthened almost 3% this year.

Investors had speculated that SNB policy makers would avoid cutting interest rates, given that they’re already at a record low. The European Central Bank also refrained from lowering rates last week, though it surprised markets with a 750 billion euro bond buying program late on Wednesday. SNB President Thomas Jordan told reporters on a conference call that fiscal policy was central to combat the crisis.The SNB isn’t only battling a weaker economic backdrop, but also a currency that’s strengthened to a five-year high.

That’s creating an additional deflationary risk amid a hit to the economy from shutdowns to try to control the spread of the virus.

President Thomas Jordan and fellow policy makers have been trying to stem the currency’s moves with interventions. The central bank spent more than 13 billion francs on that last year, and data suggest it’s been active again recently.

With business and air travel disrupted, companies shuttered and entire countries in lockdown, the global economy could be heading for a recession. The SNB sees the Swiss economy shrinking this year, having previously forecast growth of as much as 2%.

Central banks around the world have unleashed stimulus in response to the virus outbreak, and governments are pledging to spend billions to help their economies through the upheaval.

The SNB, infamous for roiling global markets in 2015 with a surprise policy switch, is one of the few central banks not to make an emergency announcement this year. It is however, taking part in operations to make sure dollar funding is easily available to banks, a program aimed at easing funding stress from the pandemic.

(Updates with Jordan comment in sixth paragraph.)

©2020 Bloomberg L.P.

Related News

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (UK) English (India) English (Canada) English (Australia) English (South Africa) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 简体中文 繁體中文 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
Saving Changes


Download the App

Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors. is better on the App!

More content, faster quotes and charts, and a smoother experience is available only on the App.