FACTBOX-SNB’s route back to conventional monetary policy

March 10 (BestGrowthStock) – The Swiss National Bank is set to keep
interest rates ultra-low and stick to its policy of currency
intervention on Thursday as it seeks to balance more optimism on
growth with risks from a strong currency.

Analysts are keen to see if the SNB continues to unwind its
drastic policy measures, adopted to fight the deep recession and
to keep the country out of deflation.

Here are the key points on the SNB’s unwinding of measures
taken in the financial crisis:

ULTRA-LOW INTEREST RATES

The SNB is expected to keep its target for the three-month
Swiss franc Libor at 0.25 percent for now. The central bank has
offered funds at 0.05 percent in its repo operations over the
last year in order to keep the LIBOR at that level.

INTERVENTIONS

The SNB softened its tone on currency intervention at its
Dec. 10 meeting, saying it was committed to fight an excessive
rise in the Swiss franc against the euro. Previously, it had
said it would oppose any appreciation.

Since December, the franc has gained over 3 percent against
the euro.

LIQUIDITY

The SNB stopped offering 3-, 6- and 12-month liquidity late
last year. The central bank’s seasonally adjusted base money has
fallen from a peak of 117.5 billion francs hit last April to 85.1
billion in January.

CORPORATE BONDS

The central bank officially ended the purchase of Swiss
franc-denominated corporate bonds at its Dec. 10 meeting after
it had bought some 3 billion francs worth of bonds since March,
mainly adding covered bonds to its balance sheet.

COVERED BONDS

Last year, the SNB brokered a number of deals based on
covered bonds in order to get liquidity from cash-rich regional
banks to the country’s two big banks UBS(UBSN.VX: ) and Credit
Suisse(CSGN.VX: ).

The last transaction was conducted in mid-2009.

DOLLAR REPOS

The SNB ended its provision of dollar liquidity for banks in
Switzerland in January, in line with other central banks.

FX SWAPS

The bank has also ended its swap agreements with the
European Central Bank as well as the Polish and Hungarian
central banks, which had provided Swiss franc liquidity against
euros to banks outside Switzerland.

Investing Basics

(Reporting by Sven Egenter; editing by Patrick Graham)

FACTBOX-SNB’s route back to conventional monetary policy