2017.12.1807:42:00UTC+00SNB Likely To Raise Rates Only After First ECB Hike

The Swiss National Bank is unlikely to change its monetary policy in the near future as the franc still remains highly valued, and is more likely to wait for the first ECB hike, Christoph Weil, an economist at Commerzbank, said.

Despite the appreciation shock, the Swiss economy posted a solid growth of 0.6 percent in the third quarter, which was the highest plus since the second quarter of 2014.

The sharp appreciation of the currency at the beginning of 2015 only caused a fall in real GDP in the first quarter of that year, which has already been made up for after two quarters, the economist observed.

However, the pace of growth almost halved and now there are signs that the economy has moved up a gear again.

Looking ahead, the economy is likely to maintain the current pace of growth in the coming quarters and real GDP to grow by 2.3 percent in 2018 after 1.0 percent this year.

On the price front, against the fears of some, deflation did not occur either, Weil noted.

In October, inflation climbed to its highest level since March 2010, at 0.7 percent.

In addition, the Swiss franc has also depreciated significantly against the euro since May this year.

However, the real effective exchange rate of the Swiss franc has now almost returned to levels seen before the EUR-CHF minimum rate was dropped.

Despite the easing of the situation, according to SNB, the negative interest rate and the willingness to intervene in the forex market are necessary essentials.

"Neither does the SNB consider the franc to be overvalued any longer, instead calling it 'highly valued'," the economist pointed out.

Commerzbank does not expect any change in monetary policy in the near future as the Swiss central bank still does not want to see a stronger CHF.

"We only expect the first SNB interest rate hike when the ECB has started to raise rates and the EUR-CHF exchange rate is above 1.20 again," the bank added.