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UniCredit: First Rate Hike in September

SNB
  • It has become clear that the very accommodative policy of the SNB is drawing to an end, after maintaining an interest-rate level of -0.75% for more than seven years. Some SNB watchers have recently even argued that there will be a rate hike already at the quarterly meeting in June in order to demonstrate the independence of Swiss monetary policymaking.
  • In our view, such a “preemptive” move before the ECB starts normalizing interest rates is still unlikely for two major reasons. First, the SNB is in a rather comfortable position, as inflation rates in Switzerland are low compared to those in other European countries. Second, and probably even more importantly, the SNB might not want to narrow the interest-rate gap with the euro zone, even for a brief period. Thus, this would actively make the Swiss franc more attractive for investors and cause volatility on FX markets.
  • It is likely that policymakers will sound decisively more hawkish. We expect the first tightening by 25bp to be announced at the meeting on 22 September. At that time, the ECB might have already increased the depo rate twice. This should give Swiss policymakers enough room to maneuver to start their own normalization in monetary policy. Going forward, we expect two further rate hikes of 25bp each to be announced at the following meetings in 4Q22 and 1Q23.
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