MNI PREVIEW: SNB To Keep Rates, FX Language Unchanged

The Swiss National Bank's monetary policy assessment Thursday is likely to see SNB Chairman Thomas Jordan echo his European Central Bank counterpart Christine Lagarde in keeping policy on hold, while stressing the franc remains "highly valued" and reiterating readiness for foreign exchange intervention if necessary.

June's assessment made reference to initial indications of a pick-up in economic activity, with further loosening of Swiss lockdown measures "likely to contribute to a significant economic recovery in the third quarter."

How significant that recovery is remains to be seen. The SNB's current inflation forecast for 2020 is −0.7%, rising to −0.2% in 2021, before breaching the surface to return to +0.2% in 2022. However, recent evidence of a strong strong domestic rebound, rising exports and improving net trade, do point to an improvement in GDP growth in Q3.

Jordan will be hoping that - as with the ECB - he can announce revised growth and inflation forecasts in line with, if not marginally better than previously predicted. But all inflation and growth forecasts will be subject to unusually high uncertainty.

The SNB's cause is not helped by the arrival of something approximating the further waves of Covid-19 referred to last time round as a downside risk. Upside risks stemming from monetary and fiscal measures introduced in Europe and elsewhere in response to the crisis are a long way from materialising.