Swiss Central Bank Keeps Key Rate Unchanged; Cuts Inflation Forecast

Switzerland’s central bank on Thursday kept its expansionary monetary policy unchanged by holding the key interest rate unchanged, citing a still strong franc, and trimmed the inflation forecast for this year due to weaker outlook for global economy.

The Swiss National Bank left its interest rate on sight deposits unchanged at -0.75 percent and the target range for the three-month Libor between -1.25 percent and -0.25 percent.

The decision was in line with economists’ expectations.

The previous move in the sight deposit rate was a 50 basis points reduction in January 2015, when the bank also abandoned its currency exchange rate ceiling of CHF 1.20 per euro.

The SNB said it will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration. The bank trimmed the inflation forecast for this year to 0.3 percent from 0.5 percent and forecast 1.2 percent price growth for next year. This downgrade was mainly due to weaker outlooks for growth and inflation abroad, and the resulting reduction in expectations regarding policy rates in the major currency areas going forward.

The inflation outlook for next year was cut to 0.6 percent from 1 percent. The bank forecast 1.2 percent inflation in 2021.

The bank still expects GDP growth of around 1.5 percent this year after a 2.5 percent expansion last year.

European Shares Mixed Ahead Of BoE Rate Decision

European stocks were trading mixed on Thursday as uncertainty surrounding Brexit and U.S. President Donald Trump’s latest comments that the U.S. tariffs on China would remain in place “for a substantial period of time” offset a boost from a dovish Federal Reserve.

The British pound held near a one-month low after U.K. Prime Minister Theresa May requested a three-month delay to Britain’s departure from the European Union.

At an EU summit in Brussels today, she will try to persuade the other 27 countries to delay the U.K’s exit beyond 29 March.

Investors also awaited the Bank of England’s latest policy decision, with analysts expecting no change in the interest rate.

Earlier in the day, the Swiss National Bank maintained its expansionary monetary policy, while the Norges bank raised interest rates and signaled there could be more policy tightening in the second half of this year.

In economic releases, U.K. retail sales posted a surprise growth of 0.4 percent month-month in February, beating forecasts.

The pan European Stoxx 600 was down 0.1 percent at 380.37 in opening deals after declining 0.9 percent in the previous session.

The German DAX was losing 0.3 percent and France’s CAC 40 index was little changed while the U.K.’s FTSE 100 was up 0.3 percent.

Banks were losing ground on concerns that their margins would erode in a low-rate environment. Commerzbank, Deutsche Bank, BNP Paribas and Societe Generale dropped 2-3 percent.

Infineon Technologies rose 1.2 percent and STMicroelectonics advanced 2 percent after U.S. memory-chip maker Micron Technology beat Wall Street’s targets for its fiscal second quarter.

Essilor Luxottica lost 4.7 percent in Paris amid infighting at the top management.

Elior Group tumbled 3.3 percent. The company said that any indication as to the result of its discussions with PAI Partners concerning a potential sale of its concession catering activities is premature.

Anglo American, Antofagasta and Glencore climbed 2-3 percent as copper prices rose on the back of a weaker greenback.

British precision engineering group Renishaw slumped 11 percent after a profit warning.

UK to boost economy early-warning system

The UK will launch a new set of early-warning indicators aimed at spotting the next big economic downturn more quickly, based on the volume of road traffic, businesses’ Vat returns and how long ships spend in port.

The UK’s Office for National Statistics has been under pressure to use more of the digital data created by businesses and consumers which other statistics agencies are streaming into their measurements of the economy. The Bank of England is likely to pay attention too, as it is trying to improve its understanding of early signals from the economy as it navigates Brexit.

“Policymakers and analysts demand faster insight into the state of the UK economy in order to make informed, timely decisions on matters such as the setting of interest rates,” said Louisa Nolan, the ONS’s lead data scientist. The new indicators will be launched in April.