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MNI SNB Review - June 2022: Endorses CHF as Tightening Tool

Executive Summary:

  • Unexpectedly raised rates by 50bps to -0.25%, and indicated that further rate rises could come
  • Bank drop their language concerning CHF valuation, introducing more two-way risk to the currency
  • Inflation forecast above target throughout 2022, before dipping back below 2.0% in 2023
Full review document here:

MNISNBRevJun22.pdf

Jordan and the board took markets by surprise on Thursday, raising rates by 50bps – the first policy tightening in Switzerland for 15 years. On top of the unexpected rate rise, the SNB pledged further tightening would come if required, and dropped their valuation view on the CHF, suggesting the bank will allow for more CHF strength in the medium-term.

This month’s decision shows the SNB are shifting from a passive, to a much more active approach to policy. This puts markets on watch for further action from the board this year – evident in the acceleration of market pricing that now sees a further 50bps hike (bringing rates out of negative territory) at September’s quarterly meeting.

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