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SNB to Stay at Record Low for Longer Amid Central Bank Shift

SNB to Stay at Record Low for Longer Amid Central Bank Shift

  • UBS, ZKB push back their expecations for Swiss rate increase
  • Global economic outlook has deteriorated in recent months
Jordan Rochester, FX strategist at Nomura, on the SNB and the franc

The world’s lowest interest rate will be around for longer than previously anticipated, with economists forecasting that a dovish shift for central banks around the world will also affect Switzerland.

Citing a delay in European Central Bank tightening, Zuercher Kantonalbank’s David Marmet pushed back his expectations for a 25 basis point increase in the Swiss National Bank’s deposit rate by a quarter. UBS Group AG took a similar step last week.

For Nomura’s Jordan Rochester, a hike at the SNB lies still further in the future.

“I don’t see them raising rates for at least a year or two, probably two or more,” he told Bloomberg Television’s Francine Lacqua and Tom Keene. “It’s all about what happens in the Europe and the U.S. and Asia.”

With the global economy on less stable footing, major central banks have adopted a dovish tone of late. The U.S. Federal Reserve changed tack in January, signaling a pause to rate increases, and ECB President Mario Draghi has indicated that officials could be even more cautious about any withdrawal of crisis-era stimulus this year.

The SNB, led by Thomas Jordan, has its deposit rate at minus 0.75 percent in a bid to maintain the interest rate differential with the euro area and thereby lessen appreciation pressure on the franc, which investors like to buy at times of market stress.

The franc has traded in a range between 1.11 per euro and 1.15 per euro in the last six months. It swooned almost 1 percent at the start of Asian trade on Monday amid thin liquidity. The round trip created a trading range of almost 110 pips, about double this year’s daily average of 56. Rochester called it a “fat finger trade.”

— With assistance by Harumi Ichikura