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The Swiss National Bank stuck with ultra-low interest rates in response to lingering risks to the economy from the pandemic and keep its "highly valued" currency in check.
Officials led by President Thomas Jordan, back at work after sick leave, also reiterated their pledge to use foreign-exchange interventions as needed. They kept both the deposit rate and the policy rate at -0.75%, a decision widely expected among economists.
Switzerland finds itself in something of a sweet spot because the economy is recovering apace without the flare up in consumer prices seen in other countries. While inflation has risen from its 2020 low, it's still forecast to remain below 1% through 2023.
The franc has depreciated against the euro amid the global economic recovery. It weakened a touch after the decision and was trading at 1.08389 per euro at 9:46 a.m. in Zurich.
Other central banks are in a different position when it comes to inflation. Policy makers in Norway may raise interest rates later on Thursday, while Federal Reserve Chair Jerome Powell said Wednesday the U.S. central bank could begin scaling back asset purchases in November.
Despite a buoyant recovery and low unemployment, the SNB is reluctant to raise what's currently the world's lowest benchmark interest rate because that could boost the haven franc and drive down inflation. Over the past decade, the SNB has spent hundreds of billions of francs on interventions.
It sees the economy growing about 3% this year, compared with roughly 3.5% expected in June.
"The current solid growth momentum is thus expected to continue in the coming quarters," it said. GDP will regain its pre-crisis level in the second half of 2020, though the central bank noted the outlook is highly uncertain.
A byproduct of the SNB's loose policy has been a worsening of property market imbalances. Lending got a boost when during the early days of the pandemic when Swiss officials deactivated a countercyclical capital buffer for banks' mortgage assets to prevent a credit crunch.
The SNB said Thursday vulnerabilities had increased further but stopped short of calling for a reactivating of the buffer.
According to some measures, housing is overvalued by as much as 30%.
"The SNB hasn't changed its stance and communication -- which isn't surprising," said UBS Group AG Economist Alessandro Bee. "If there was a surprise, it's that they didn't change their wording on the franc and on the real estate market."
(Updates with market reaction, quotes from fourth paragraph.)
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