June 17, 2022 14:18 GMT
- The decision to act was justified by higher concerns over inflation. CPI forecasts have been sharply revised up compared to March, with inflation expected to be more persistent over the medium term. The CPI rate is expected to fall back below 2% next year but is then projected to hover between 1.4% and 2.0% thereafter, which is relatively high by Swiss standards.
- Like the SNB, we sharply lift our inflation forecasts, to 3.0% in 2022 and 2.1% in 2023, from 2.1% and 1.4% previously. This reflects the latest upside surprises in the CPI outturns, alongside the recent evolution of CHF and higher commodity prices.
- Against that backdrop and given the more hawkish stance from the SNB, we now expect another 50bp rate hike in September, followed by a 25bp rise in December. Indeed, the global context (with major central banks in tightening mode) allows the SNB to front-load its rate hikes, in our view. That said, these forecasts remain subject to risks in both directions and are especially dependant on the evolution of the CHF in the coming months.