"The SNB will continue to take account of the exchange rate situation, and its impact on inflation and economic developments, in formulating its monetary policy."
- Swiss National Bank
Following its meeting on Thursday, the Swiss National Bank decided to keep the main policy rate unchanged at the record-low level below zero at -0.75%. At the moment, the key interest rate in Switzerland is the lowest among major central banks around the world. The Bank of Japan is also keeping its benchmark below zero, namely at -0.1%. However, according to the Swiss monetary policy regulator, negative interest rates are making the process of holding investments in Francs more attractive. At the same time, the SNB noted that the national currency is still too much overvalued and should weaken in the foreseeable future, as high exchange rates of the Franc is negatively influencing economic development and consumer prices in Switzerland. Earlier this year, the SNB abandoned its peg to the Euro, thus causing a massive appreciation of the Franc. In the meantime, the central bank promised to remain active in the foreign exchange market, if necessary, to control monetary conditions.
Meanwhile, stronger Franc has negatively resulted in deteriorating trade balance numbers. Switzerland's exports plunged 3.9% in February on the annual basis, while imports rose. As a consequence, trade surplus fell considerably, from 3.41 billion francs in January down to 2.47 billion francs last month.
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