Thursday June 14, 2007 - 10:34:32 GMT
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INVESTICA Ltd - www.investica.co.uk
Swiss tightening will continue
There will be some disappointment that the National Bank did not increase interest rates by 0.5% at the council meeting, but the firm statement will support the Swiss currency.
The Swiss currency was trapped weaker than 1.65 against the Euro on Wednesday and also weakened to lows beyond 1.2460 against the dollar before a modest recovery. The Swiss currency weakened slightly following the SNB meeting.
The Swiss National Bank increased interest rates by a further 0.25% to 2.50% following the latest policy meeting. The central bank has also increased its 2007 inflation forecast to 0.8% from 0.5%. The 2008 inflation forecast has been increased to 1.5% from 1.4% while GDP growth forecasts have been revised up. The central bank council did discuss the possibility of a 0.5% rate increase at the meeting.
Bank President Roth warned that the intended policy tightening has been neutralised by the franc weakness while the overall inflation outlook has deteriorated since the last meeting. The comments suggest that the bank will look to increase interest rates again in September. There will be some disappointment that the bank did not increase rates by 0.5%, but the remarks suggest that the bank will take a firm stance which should provide underlying franc support over the next few weeks.
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