MNI PREVIEW: SNB On Hold As Vaccine Boost Tames CHF Rise

Increased risk appetite prompted by the prospect of mass Covid vaccinations is easing upward pressure on the franc against the euro, but the currency's continued appreciation against the dollar will see the Swiss National Bank repeat that CHF remains "highly valued" and reiterate its willingness to intervene in currency markets when necessary in Thursday's monetary assessment.

The SNB's policy rate is expected to remain at –0.75% over the entire forecast horizon, with recent increases in Swiss Covid infection rates unlikely to prompt additional monetary easing.

Strong consumer spending going into the tail end of 2020, adding to a solid performance by manufacturing output, offers hope of a small upwards revision of the outlook for 2020 inflation, which was forecast at -0.6% in September. This supports the previous outlook for inflation to rise to 0.1% in 2021, and to increase to 0.2% the following year, though a second wave of European and global lockdowns leading into Christmas and New Year means considerable uncertainty remains.

SNB president Thomas Jordan will again stress the vital role of SNB policy in cushioning the negative impact of the pandemic on activity and inflation.