SNB may weaken franc

CPI is falling, import prices have collapsed, growth in Switzerland has eased notably. 

The Swiss National Bank (SNB) should not seem surprised by any of this in its quarterly Monetary Policy Assessment today. It was no doubt aware of the fact that its decision to abandon the minimum exchange rate would have such an effect. The question is whether the extent of the effect came as a surprise. After all that will decide whether it considers it to be appropriate to decide on further expansionary measures.The fact is that even if it considered such steps to be appropriate there is nothing it could do.

Commerzbank says, "With a deposit rate of -0.75% further cuts would hardly show the desired effect. In the long run interventions would merely fuel speculation against the franc. That is what abandoning the minimum exchange rate caused. However, the majority of market participants has not yet taken this on board so that the SNB will today have the opportunity to weaken the franc with some threats; even though that is unlikely to work long term."