BERN (Reuters) – The Swiss National Bank maintained its expansionary monetary policy on Thursday, citing a “fragile” exchange rate situation that made it essential for the central bank to keep interest rates negative and be ready to intervene in currency markets.
The SNB kept its target range for the three-month London Interbank Offered Rate (LIBOR) at -1.25 to -0.25 percent, as unanimously forecast in a Reuters poll of economists.
Bank - Interest - Rate - Sight - Deposits
The central bank also held the interest rate it charges on sight deposits at -0.75 percent, adding it remained ready to intervene in the foreign currency markets to block a rise in the Swiss franc.
Both measures have been employed by the SNB to stem investor appetite for the franc over the last three-and-a-half years.
SNB - Description - Franc - Currency - Weakening
The SNB maintained its description of the franc as “highly valued”, adding that despite the currency’s weakening during 2018 the situation on the currency markets was “fragile”.
“The Swiss franc initially depreciated slightly against the U.S. dollar and the euro,” the SNB said. “However, in light of political uncertainty in Italy, we have since seen countermovement, particularly against the euro.
Situation - Exchange - Market - Interest - Rate
“The situation on the foreign exchange market thus remains fragile, and the negative interest rate and our willingness to intervene in the foreign exchange market as necessary therefore remain essential.”
The SNB is expected to be among the last central banks to normalize its negative rates.
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