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Credit Suisse: Sees No Movement on Rates With Medium-Term Inflation Unchanged

SNB
  • Expects the SNB to maintain its policy rate unchanged at -0.75%. The medium-term outlook for inflation has not changed much in our view, and we have kept our forecast unchanged for 2023 at 1%. Similarly, SNB board members have recently indicated that they expect inflation to decelerate in the second half of 2022 and in 2023.
  • This should allow the SNB to remain a bit more patient than other central banks with interest rate hikes. In our view, it is quite unlikely that the SNB will upgrade its 2023 inflation forecast from currently 0.9% to 2.0% or more. However, the risk of such an upgrade is higher for 2024. An inflation forecast at or above 2% for 2024 would signal that the current monetary policy stance is not sustainable anymore in the medium term (the SNB inflation forecast is conditional on an unchanged policy rate) and would pave the way for a rate increase in the second half of 2022.
  • While we currently expect the SNB to wait until December to raise its policy rate from currently -0.75% to -0.50%, we acknowledge that the risk of a policy rate increase in September has increased. Finally, we expect the SNB to stop calling the Swiss franc “highly valued,” as it has done since September 2017.
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