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Main » 2015 » October » 20 » Finance News: SNB could cut rates again in response to the ECB
Finance News: SNB could cut rates again in response to the ECB

SNB will have to resort to the regulation of the currency if the ECB will expand the program of quantitative easing.



Among regulatory actions: selling francs, and the possibility of another rate cut on deposits.

Sixty-three percent of the economists predict that the Swiss National Bank (SNB) to react market intervention to halt the rise in the currency, according to the monthly survey agency Bloomberg. Forty-two percent predict another rate cut on deposits.

Taking into account that the expansion of the program enabling the purchase of bonds of the European Central Bank is in development - to add to it another 1.1 trillion euros ($ 1.3 trillion) - this can increase the franc EUR / CHF, which the Swiss political legislators have called overrated. "The SNB has reacted to the policy of the ECB, it has reduced its deposit rate to a minimum in January to prevent the impact of quantitative easing."

"There is a growing risk that the ECB may extend the program to purchase assets in order to encourage low inflation and weak economic growth," - said Maxim Botteron, an economist at Credit Suisse Group AG in Zurich.- "We believe that the SNB will continue to intervene."

Weak data on inflation in the euro zone and the slowdown in global demand increasing pressure on ECB President Mario Draghi to increase incentives, and more than 80% of economists in a separate Bloomberg survey expect such actions. While officials have repeatedly stated that they are ready to do more if needed, they also said it was too early to decide. The Board of Governors will hold a meeting of the Policy on Thursday.

Considering that the Swiss central bank has already accumulated 541.5 billion. Francs ($ 565.7 billion.) 
Foreign exchange reserves to curb the franc, political legislators may also resort to the increase in royalties from demand deposits. SNB President Thomas Jordan told Bloomberg in an interview this month that while the deposit rate corresponding to date "it is possible that it could be reduced."

Economists expect the minimum rate minus 1.25%, according to the median of 10 estimates collected between 9th and 15th of October.

Gitzel Thomas, senior economist at VP Bank in Liechtenstein, predicts that the rate could "theoretically" fall to minus 2%, adding that "the storage of banknotes more expensive."


According to the materials Weltrade


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