Bloomberg

(Bloomberg) -- The Swiss National Bank maintained its ultra-loose negative interest-rate policy and pledged to intervene in currency markets if needed, saying the Brexit vote has clouded its view of the global economy.

Switzerland’s central bank, which for years has been combating an overvalued currency, left its deposit rate at a record low of minus 0.75 percent, as forecast by all economists in a Bloomberg survey. It vowed to keep “active” in the foreign exchange market as necessary. No press conference is scheduled.

“The vote for the U.K. to leave the European Union has caused considerable uncertainty and makes an assessment of the global economic outlook more difficult,” the SNB said in a statement on Thursday. “As regards the global economy, the risks remain to the downside, owing to numerous structural problems.”

The SNB, led by Thomas Jordan, is one of several central banks taking a wait-and-see approach after Britain’s vote to leave the European Union, though it did sell francs in the immediate aftermath of the referendum. Market volatility picked up again over the past week as the Federal Reserve weighs the case for a U.S. interest-rate increase at a time when the efficacy of stimulus in Europe and Japan is unproven.

“They’ve still got their focus on the ECB, which hasn’t gone for big changes lately either,” said Markus Schmieder, an economist at Wellershoff & Partners in Zurich. “As there still does not seem to be any will within the SNB to let the Swiss franc appreciate, they will continue to wage interventions. They’ll hope that there are not more crises like Brexit.”

The SNB’s policy of negative rates and a pledge to buy foreign currencies has been in force since early 2015, when it stunned investors by giving up its minimum exchange rate in response to the prospect of the ECB beginning to buy sovereign bonds. The SNB’s switch caused the franc to shoot up to 85.17 centimes per euro, it’s strongest level on record. The currency has depreciated since then, and it has traded weaker than 1.08 per euro since June. That’s welcome news for the country’s exporters.

The SNB still has leeway to cut rates further, with economists saying they could go as low as minus 1.25 percent before cash hoarding sets in. While anecdotal evidence suggests more companies are purchasing insurance for storing cash, Swiss policy makers have said there is no indication of a banknote accumulation.

Swiss economic growth is forecast to accelerate this year, thanks in part to better demand in the euro area, the country’s biggest trading partner. Momentum proved unexpectedly robust in the second quarter. Still, the strong franc is pushing down import costs. Last year, prices plunged at the fastest rate since 1950. Moreover, the fallout from the U.K.’s decision to leave the 28-country European Union might still weigh on the region’s prospects.

--With assistance from Joel Rinneby Joshua Robinson Marco Babic Mara Bernath Jan-Henrik Förster Paul Gordon Corinne Gretler Jana Randow Craig Stirling Brian Swint Albertina Torsoli and Paul Verschuur To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net. To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Zoe Schneeweiss, Craig Stirling

©2016 Bloomberg L.P.

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