SNB Defies U.S. Criticism to Renew Currency Intervention Vow

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TheSwiss National Bank renewed its pledge to use currency interventions to counter upward pressure on the franc just a day after being censured by the U.S. for the practice.

SNB officials led by President Thomas Jordan called the franc “highly valued” on Thursday, sticking with a key phrase they use to signal they remain on alert. They also kept their policy rate and deposit rate at -0.75%, a move expected by economists, citing a bleak outlook for inflation.

The central bank said the coronavirus is “continuing to have a strong adverse effect on the economy.” It sees consumer prices falling sharply this year and staying around zero over the next two years.

The U.S. Treasury Department designated Switzerland acurrency manipulator on Wednesday after the SNB’s interventions surged to 90 billion francs ($102 billion) in the first six months of this year. It had to step up the action to counter a rush of investors into the perceived safety of the Swiss currency amid the pandemic.

While the exchange rate has eased somewhat in recent months, in part thanks to the European Union’s historic spending package, it’s still pushing down on inflation by making imports cheaper.

In addition, further risks such as a no-deal Brexit and an escalation in U.S.-China tensions could intensify buying of the franc. The currency was at 1.0812 per euro after the SNB decision, down just 0.1% on the day.

The central bank also said it sees the economy growing 2.5%-3% next year. Output shrank by the most in decades this year as shops and businesses were shut to stem the spread of the virus, though the slump was mild compared with many other European countries.

The government is poised to intensify social distancing restrictions because of the second wave, which would drag on the recovery. The SNB said economic momentum will remain weak into early 2021.

— With assistance by Paul Gordon, Leonard Kehnscherper, Alexander Michael Pearson, Jeff Black, Jana Randow, Claudia Maedler, Carolynn Look, Zoe Schneeweiss, Joel Rinneby, and Harumi Ichikura

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