2016.06.1604:19:00UTC+00SNB Keeps Negative Rates On Hold

The Swiss National Bank maintained its negative interest rate and repeated its view that the franc is still significantly overvalued.

The interest rate on sight deposits at the central bank was retained at -0.75 percent, and the target range for the three-month libor between -1.25 percent and -0.25 percent, the bank said in a statement on Thursday.

In January 2015, the SNB unexpectedly discontinued the minimum exchange rate of CHF 1.2 per euro, resulting in a sharp appreciation of the currency.

The bank said negative interest rate and its willingness to intervene in the foreign exchange market are intended to make Swiss franc investments less attractive, thereby easing pressure on the currency.

"The Swiss franc is still significantly overvalued," the bank said. "The SNB's expansionary monetary policy is aimed at stabilizing price developments and supporting economic activity."

The central bank upgraded its inflation outlook for 2016 and 2017, citing the significant increase in oil prices since March. At -0.4 percent, the inflation forecast for 2016 was 0.4 percentage points higher than in March.

For 2017, the SNB expects an inflation rate of 0.3 percent instead of the 0.1 percent forecast in the last quarter. The rate is forecast to improve to 0.9 percent in 2018.

Earlier in the day, the State Secretariat for Economic Affairs lifted its inflation projections. The government agency also forecast -0.4 percent inflation for 2016 and +0.3 percent next year.

The central bank expects the moderate growth in the global economy to sustain over the coming quarters.

Nevertheless, significant risks remain for the global economy as the imminent UK referendum on whether to stay in the European Union may cause uncertainty and turbulence to increase, it added.

SNB said available indicators suggest that the Swiss recovery will be ongoing. For 2016 as a whole, the bank still expects real GDP growth of between 1 percent and 1.5 percent.

Further, the bank pledged to monitor developments on the mortgage and real estate markets closely, and to regularly reassess the need for an adjustment of the countercyclical capital buffer.