Swiss National Bank Reduces Overnight Deposits by 30%
According to data released Monday, the amount of cash held overnight by commercial banks with the Swiss National Bank was down by 30 billion Swiss Francs ($30.07 trillion) which shows how the central bank is tightening its monetary policy through reducing market liquidity.
From 669.585 billion Swiss Francs the week before, total sight deposits fell to 639.332 trillion francs.
The last week’s decline was the second largest in sight deposits, cash held by commercial banks with the central bank. This is a drop that has been recorded weekly since 11 years ago.
It comes after a 77.5 billion Franc drop in the previous week and is likely to be the SNB selling bills or repos into the market as part its strategy to increase the Swiss Average Rate Overnight, (SARON), towards the central bank’s policy rate of 0.5%. Economists stated.
In an effort to combat inflation in Switzerland, the SNB increased its policy rate by 0.5% last month.
It refused to comment Monday on its actions.
Maxime Botteron, Credit Suisse economist, said that the SNB’s liquidity-absorbing operations such as the sale repos and SNB Bills were likely to have led to a decline in sight deposits.
It was possible that the Swiss National Bank had sold some of its foreign currency to preserve its value as the Swiss Franc fell last week. This has helped limit the import inflation.
Andrea Maechler, a member of the Governing Board, stated that the SNB is prepared to intervene in foreign currency sales or purchases if the Franc becomes too weak or too strong.
Karsten Junius, an economist at J.Safra Sarasin, stated that “I expect the SNB continues absorb liquidity from the marketplace by issuing more bills & fine-tuning avec more repos if it remains too low below the policy rate.”
He stated that the SARON is at 0.445% today, which is close to the official rate of policy. Therefore, further intervention through bills or repos doesn’t seem so urgent.
($1 = 0.9977 Swiss francs)
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