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SNB Introduces Key Policy Rate of -0.75% to Replace 3-Month Libor Band -- Update

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06/13/2019 | 05:00am EDT

By Brian Blackstone

BERN, Switzerland--The Swiss National Bank left its key interest rate unchanged Thursday in deeply negative territory, as the bank confronts challenges presented by expectations for easier monetary policy in the U.S. and eurozone.

The SNB held its deposit rate at minus 0.75% as expected by economists. The rate has been at that level since January 2015. The SNB also introduced an "SNB policy rate" at minus 0.75% to replace its three-month Libor band, which had long been set at a range of minus 1.25% to minus 0.25%.

In a statement, the SNB said the Swiss franc is still "highly valued," and that it would intervene in currency markets if needed to keep it from strengthening too much. "The negative interest rate and the SNB's willingness to intervene in the foreign-exchange market as necessary remains essential," the SNB said in a statement.

The SNB made the change because of uncertainty over Libor's future. "The U.K.'s Financial Conduct Authority will only ensure that the Libor is maintained through to the end of 2021," the SNB said. However, with the new minus 0.75% policy rate, "monetary policy thus remains as expansionary as before," it said.

Meanwhile, the bank nudged its inflation forecast higher for this year but it remains ultra-low. It now sees inflation this year at 0.6% compared to 0.3% in March. It expects 2020 inflation at 0.7% and 1.1% in 2021.

These forecasts are based on the assumption that policy rates remain where they are currently, suggesting the SNB is in no hurry to tighten monetary policy for a long time.

The U.S. dollar traded at 0.9932 francs early Thursday, down 0.2% from Wednesday.

Write to Brian Blackstone at brian.blackstone@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
EURO / SWISS FRANC (EUR/CHF) -0.12% 1.10001 Delayed Quote.-2.07%
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