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The Swiss National Bank stuck with ultra-loose monetary policy and a pledge to battle currency strength amid a deteriorating backdrop that’s tying its hands.

The SNB’s dual tack of record-low interest rates and unwavering intervention threats have been at the heart of of the President Thomas Jordan’s push in recent years to keep the franc in check. A downshift in the world economy and a shift by other central banks is boosting the currency, a haven in times of stress, meaning he’s likely to be stuck with the policy for some time.

Jordan acknowledged the more difficult situation by saying global economic risks are “more pronounced than at our previous monetary policy assessment.” He noted the franc is “somewhat stronger,” but kept his description as “highly valued” rather than opt for more forceful language.

The reaction in markets was a strengthening of the currency. It was up 0.2% to 1.12127 per euro as of 11:24 a.m. Zurich time. It reached 1.11178 earlier this month, the highest since 2017.

The central bank also introduced a new policy rate to replace its current Libor-based range, as that benchmark is being retired in the wake of a manipulation scandal. The SNB said sight deposits will still face a -0.75% interest charge and its policy “thus remains as expansionary as before.”

The SNB’s view of the global outlook echoes that from central banks, which have warned about U.S. protectionism and slower trade growth. European Central Bank officials have committed to keeping borrowing costs at record lows for longer, and U.S. Federal Reserve Chairman Jerome Powell has signaling a willingness to act if needed.

The SNB expects raised its inflation forecasts for this year and next, and lowered them slightly in 2021, to 1.1%. It defines price stability as inflation less than 2%, and its projections show it never breaches that level through the three-year forecast horizon.

“Our expansionary monetary policy remains necessary,” Jordan said at a press conference. He stressed that the SNB still has room to react to any shocks, and in response to a question about whether rate cuts or interventions would be the preferred weapon said it would depend on the situation.

--With assistance from Leonard Kehnscherper, Jan Dahinten, Alexander Kell, Zoe Schneeweiss, Brian Swint, Harumi Ichikura and Joel Rinneby.

To contact the reporter on this story: Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net

©2019 Bloomberg L.P.

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