"The SNB is likely to continue to enforce the minimum exchange rate with utmost determination as long as needed" - Gero Jung, chief economist at Mirabaud Asset Management
The Swiss National Bank is expected to keep the Franc's cap into 2016 as the Euro zone policy makers' attempts to boost inflation weigh on the Swiss currency. The ECB President Mario Draghi move to fuel growth and inflation in the 18-nation bloc with the help of negative deposit rate and a lending programme could spur demand for the Franc. The SNB capped the Franc at 1.20 per Euro around three years ago to combat the risk of deflation and a recession as investors turned to the Franc as a refuge amid the Euro zone's debt crisis. Given the consumer prices growth is set to stagnate this year, rising to just 0.4% in 2015, President Thomas Jordan reiterated that the cap remains the main policy tool in the foreseeable future. The Swiss Franc gained as much as 0.5% against the single currency last month. It traded at 1.2152 versus the Euro zone's currency yesterday.
Moreover, another challenge the SNB officials may face is growth risks stemming from the government's new quotas on immigration fro European Union citizens. Majority of economists believe the move might hurt growth. The new system, which the government intends to implement from 2017, is a response to a national referendum in February in favour of measures to halt mass immigration. The change has to be passed by the parliament and could face another country-wide vote.
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