ZURICH: The Swiss National Bank will keep the 1.20 cap on the franc for at least six months, intervening in foreign exchange markets again or even effectively charging for franc deposits if needed, a Reuters poll found on Tuesday.
An interest rate cut by the European Central Bank two weeks ago, as well a new scheme to push money into the flagging euro zone economy, has put renewed pressure on the Swiss central bank's (SNB) efforts to stem the franc's strength.
The SNB capped the franc at 1.20 per euro in September 2011 after investors fleeing the euro zone debt crisis snapped up the safe-haven currency and sent it to record highs, squeezing Swiss exporters and threatening to snuff out inflation.
Twenty-one of 22 economists who replied to a question about a possible change of the cap's level said they did not expect the SNB to move it in the next six months, while one said it could be hiked to 1.25 early next year.
Eight of 21 economists who responded see the franc cap being maintained until sometime in 2016 at least, and another eight expect it to still be in place in early 2017, the poll showed.
The Swiss central bank is expected to keep interest rates at rock bottom at a meeting this week. It will announce its quarterly monetary policy decision at 0730 GMT on Thursday.
Several economists polled expect the bank to go back to its previous pattern of buying euros to weaken the franc.
"They know currency intervention works," said consultancy 4Cast.
"Further currency purchases will build on existing credibility which may win the SNB support from the market in defending the floor."
The SNB injected hundreds of billions of francs into the foreign exchange market in 2012 as the euro zone crisis flared, swelling its foreign currency reserves.
The last time the SNB intervened was in September 2012, but recently the franc has strengthened towards the 1.20 threshold, which might again push the bank into action.
Several poll respondents raised the spectre of the bank effectively charging for Swiss franc deposits by imposing negative interest rates. The ECB cut its deposit rate to -0.20 percent two weeks ago.
Ten of 22 economists polled said the SNB was likely to resort to franc fees, while five were neutral and seven said it was unlikely or very unlikely.
"Instead of doing quantitative easing, the SNB will thus rather make it yet more unattractive for foreigners to invest in Swiss franc assets, for instance via negative interest rates for deposits," according to analysts at IHS Global Insight.
The SNB itself has used talk of negative rates as an example of how it could step up the fight to keep the franc down.
Switzerland's economy unexpectedly stalled in the second quarter as trade took a hit from stagnation in its main export market Europe and construction spending fell.
All 30 economists polled expect the central bank to keep its target range for the Swiss franc LIBOR, its benchmark interest rate, at 0 to 0.25 percent for now.
Median forecasts suggest it will remain near zero through 2015, with only two banks forecasting a hike in the second half of next year.
The central bank will also issue fresh growth and inflation forecasts on Thursday. Economists expect it to cut its forecast for growth this year to 1.5 percent, from "around 2 percent" previously.
Price pressures are not forecast to approach the SNB's 2 percent threshold anytime soon. The bank is expected to confirm its predictions for inflation of 0.1 percent this year, 0.3 percent in 2015 and 0.9 percent in 2016.
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