By John Revill
ZURICH (Reuters) -The Swiss National Bank kept its ultra-expansive monetary policy on hold on Thursday, bucking the trend of other central banks which have started hiking interest rates to tackle rising inflation.
The SNB kept its policy rate locked at -0.75%, as unanimously forecast by economists in a Reuters poll, as well as its commitment to conduct currency interventions to stem the rise of the safe-haven Swiss franc.
The central bank also kept its description of the franc as “highly valued”, the same wording it has deployed since September 2017, despite the currency’s recently hitting its highest level against the euro in seven years.
The SNB said Russia’s invasion of Ukraine has led to a “strong increase in uncertainty worldwide”, traditionally seen as a trigger for safe-haven flows into the currency, driving it its value briefly above parity against the euro.
The SNB responded with an unusual verbal intervention, while also stepping up its foreign-currency purchases to dampen the appreciation pressure.
While the franc has since depreciated, Swiss inflation has continued to rise, hitting 2.2% in February — above the SNB’s 0-2% target and its highest level since 2008.
The SNB the Ukraine conflict would lead to higher prices, raising its inflation forecasts due to rising oil prices and supply bottlenecks.
It doubled its inflation outlook for 2022, now expecting Swiss inflation of 2.1%. It also raised its inflation forecast to 0.9% for 2023 from 0.6% previously and expects inflation at 0.9% in 2024.
The SNB downgraded its economic forecasts for Switzerland, saying it now expected growth of 2.5% this year, compared to its previous view of around 3%. [Z8N2TF00O]
But despite rising prices, the SNB decided not to follow the example of the U.S. Federal Reserve and the Bank of England, which both raised rates last week.
The Fed increased rates for the first time since 2018, with more rises expected by the end of 2022.
The Bank of England acted in a bid to stop fast-rising inflation becoming entrenched, taking its interest rate to 0.75% from 0.5%.
Norway’s central bank has also started hiking rates and was due to give its latest announcement on Thursday.
(Reporting by John Revill; Editing by Michael Shields)
