ZURICH: Switzerland's central bank will keep interest rates steady until at least the end of next year, a Reuters poll predicted, as the bank tries to weaken the strong Swiss franc.
All but one of the 34 economists polled said the Swiss National Bank would leave its target range for three-month Swiss Libor unchanged at -1.25 to -0.25 percent at its quarterly policy assessment on Sept. 17.
Medians from the poll, taken this week, suggested the SNB would leave its benchmark interest rate unchanged until the end of next year.
Switzerland's export-reliant economy had to deal with a surge in the franc's value after the SNB scrapped its cap of 1.20 francs per euro in mid-January. It said the policy, in place since September 2011, had become too expensive to maintain.
The SNB has stated repeatedly it expects negative interest rates, coupled with its willingness to intervene in the currency market, to weaken the "overvalued" Swiss franc.
After soaring in the immediate aftermath of the shock move, the franc has pared gains in recent weeks amid a brighter outlook for the euro zone, talk of a rate hike by the US Federal Reserve and speculation of SNB currency market intervention.
On Tuesday, the franc traded at 1.0983 per euro, the weakest since the SNB's Jan. 15 announcement.
LESS PRESSURE TO ACT
The SNB has stressed it has room to push interest rates further into negative territory but most economists said they expected it to maintain current policies for the foreseeable future.
"We do not expect any change in the SNB's benchmark rate over our forecast horizon (until 2016)," Credit Suisse economist Maxime Botteron said.
The SNB has also imposed a 0.75 percent charge on some franc deposits with the central bank to ward off foreign inflows.
A majority of economists predicted the SNB would leave this charge unchanged until at least the end of next year.
Asked at what price the SNB would make currency purchases to weaken the franc, the median forecast from 10 economists was 1.03 francs per euro.
At its June meeting, the SNB forecast inflation of -1.0 percent for 2015 and -0.4 percent for 2016.
The average economist forecast was for the central bank to lower those predictions to -1.2 percent in 2015 and -0.5 percent in 2016.
In the second quarter, Switzerland avoided an anticipated recession and the franc's recent depreciation means the SNB can afford to let its current policies play out, according to IHS Global economist Timo Klein: "The recent weakening of the Swiss franc versus the euro has reduced the pressure on the SNB to act."
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