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23 Apr 2015
Swiss franc under pressure post-SNB move – Danske Bank
FXStreet (Edinburgh) - In light of yesterday’s announcement from the SNB, Chief Analyst Allan von Mehren at Danske Bank, reviewed the recent decision by the central bank.
Key Quotes
“Yesterday the SNB expanded the number of sight-deposit accounts on which negative interest rates are charged to notably include a range of public accounts as well”.
“As such, yesterday's move effectively work as a rate cut and we regard this as means to ensure greater transmission of negative rates, hence underlining the SNB's preference to use rates rather than intervention to steer the CHF weaker as the central bank has itself put as a prerequisite for reaching its inflation target in the medium term”.
“Notwithstanding yesterday's ‘rate cut’ we still look for the SNB to cut rates by 10bp at the June meeting, which would take both the Libor target and the sight-deposit rate to - 0.85%”.
“Another option for the SNB could, however, also be to reduce the threshold level for when negative rates are charged on sight deposits”.
Key Quotes
“Yesterday the SNB expanded the number of sight-deposit accounts on which negative interest rates are charged to notably include a range of public accounts as well”.
“As such, yesterday's move effectively work as a rate cut and we regard this as means to ensure greater transmission of negative rates, hence underlining the SNB's preference to use rates rather than intervention to steer the CHF weaker as the central bank has itself put as a prerequisite for reaching its inflation target in the medium term”.
“Notwithstanding yesterday's ‘rate cut’ we still look for the SNB to cut rates by 10bp at the June meeting, which would take both the Libor target and the sight-deposit rate to - 0.85%”.
“Another option for the SNB could, however, also be to reduce the threshold level for when negative rates are charged on sight deposits”.