Swiss central bank keeps policy loose

BERN: The Swiss National Bank stuck to its monetary policy guns on Thursday when it kept interest rates at record low levels to keep a lid on the "significantly overvalued" Swiss franc.

The central bank said it was keeping the target band for three-month Libor at -0.25 to -1.25 percent and the interest rate it charges on sight deposits at -0.75 percent. "The negative interest rate and the SNB´s willingness to intervene in the foreign exchange market are intended to make Swiss franc investments less attractive, thereby easing pressure on the currency," the SNB said in a statement.  It trimmed its forecasts for inflation in 2017 and 2018 but kept its outlook for the economy to grow around 1.5 percent this year and next.

"The SNB expects the moderate pace of global growth to continue in 2017. The baseline scenario for the world economy is still subject to considerable risks, however," it said, adding structural problems in some advanced economies could hurt the outlook.

"Added to this are a multitude of political uncertainties which are particularly associated with the future course of economic policy in the U.S., upcoming elections in several countries in the euro area as well as the complex and arduous exit negotiations between the UK and the EU," it said.

The negative interest rate and a readiness to intervene in the foreign currency markets have been the twin pillars of the SNB´s strategy since it scrapped a cap on the franc versus the euro nearly two years ago. Economists had expected the SNB to keep its negative interest policy into 2018 despite criticism from pension funds and banks who see it as charge on their business.