Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

SNB Keeps Rate on Hold as Japan Aftermath Strengthens Franc

Swiss National Bank Chairman Philipp Hildebrand
Swiss National Bank chairman Philipp Hildebrand. Photographer: Adrian Moser/Bloomberg

The Swiss central bank today kept borrowing costs near zero as policy makers assess increased global uncertainty that pushed the franc to a record in the aftermath of Japan’s earthquake.

The Zurich-based Swiss National Bank, led by Philipp Hildebrand, left its three-month Libor target rate at 0.25 percent. That’s in line with the forecasts of all 20 economists in a Bloomberg News survey. The SNB raised its forecast for economic growth and inflation in 2011.

The franc appreciated to a record against the dollar today as Japan’s quake adds to investor concern that the global economic recovery may fade in the wake of Middle East unrest and Europe’s fiscal crisis. While the currency’s strength is undermining Swiss exports, it is also helping counter price pressures by making imports cheaper and giving policy makers room to keep interest rates on hold.

“Continuing debt problems in Europe and the possible dampening effects of high oil prices on economic activity pose considerable downside risks,” the SNB said in its statement. “In addition, the consequences of the earthquake catastrophe in Japan are, at this stage, difficult to assess.”

The franc gained 0.7 percent and traded at 90.13 centimes versus the dollar at 11:06 a.m. in Zurich. Against the euro, it was little changed at 1.2649, down from 1.2621 yesterday.

Franc Surge

The Swiss currency, which is considered a haven in times of turmoil, has appreciated against the euro as European leaders struggled to contain the region’s debt crisis. It strengthened to an all-time high 0f 89.11 centimes against the dollar on concern about an unfolding nuclear disaster in Japan.

The Bank of Japan’s pledge to secure financial stability and prevent investors from becoming more risk averse has failed to stem a plunge in global stocks. In Germany, Europe’s largest economy, investor confidence unexpectedly dropped in March. The benchmark Swiss Market Index has shed 6.3 percent this year.

Group of Seven nations officials will hold talks on financial markets and Japan’s economy tomorrow, Japanese Finance Minister Yoshihiko Noda told reporters in Tokyo today.

‘Step Back’

Worsening global growth prospects and retreating oil prices may prompt central banks to keep borrowing costs on hold for longer. European Central Bank council member Ewald Nowotny said on March 14 that policy makers are monitoring developments “very closely.” President Jean-Claude Trichet had signaled earlier this month that the bank may raise the benchmark rate as soon as April to fight price pressures.

“In general the movement of central banks has been to normalize rates,” said Stefan Hofer, a strategist at Julius Baer Holding AG in an interview with Bloomberg Television from Zurich today. “At this moment, it makes sense to take a step back from this process, for now at least.”

Inflation in the 17-member euro area accelerated to 2.4 percent in February, the fastest in more than two years. In Switzerland, inflation may average 0.8 percent this year and 1.1 percent in 2012, the SNB said. It previously forecast inflation at 0.4 percent and 1 percent this year and next. In 2013, consumer prices may rise an annual 2 percent.

‘No Rush’

“Although inflation seems to be a threat elsewhere in Europe, the SNB does not seem to worry yet,” said Julien Manceaux, an economist at ING Group in Brussels. “We don’t expect any rate increase before the September meeting.”

So far, the economy is weathering the franc’s surge. Investors grew more optimistic this month, leading economic indicators rose in February, manufacturing growth accelerated and unemployment declined. The SNB today raised its growth forecast for this year to about 2 percent from 1.5 percent.

Near-zero borrowing costs and a strengthening economy have already fueled property prices in cities including Zurich, which is home to some of the country’s largest companies such as UBS AG and Zurich Financial Services AG. The SNB said that real-estate developments require its “full attention.”

“As expected, the SNB is a bit more optimistic about economic growth,” said Fabian Heller, an economist at Credit Suisse Group AG in Zurich. “Still, as long as the franc remains strong and inflation is no immediate threat, they are in no rush to raise rates.”

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.