MNI SNB WATCH: Caution On Rates After UBS-CS Deal

The Swiss National Bank is expected to raise its policy rates by 25bps to 1.25bps on Thursday, despite the fallout of the hurried takeover of Credit Suisse by UBS, as it faces inflation still substantially outside the target range at 3% and following last week’s 50bp hike by the European Central Bank.

With no further monetary policy assessments scheduled before June, the SNB, which had stated in December that additional rate rises “cannot be ruled out,” had until recently been widely seen to be on course for a 50bps rise. But market uncertainty following the collapse of SVB in the U.S. and Credit Suisse at home will likely render policymakers more cautious, with currency interventions possibly playing a greater role in the near term.

Updates will also be published to December’s conditional forecast, which put inflation at 2.4% for 2023 and 1.8% for 2024, with growth falling back from 2.0% in 2022 to just 0.5% this year.

The SNB and Swiss regulators shocked investors with the decision to wipe out Credit Suisse AT1 bond holders before those holding equity in the creation of a new merged bank, which some argue may be too big for Switzerland. (see MNI INTERVIEW: Swiss Should Explain Why Emergency Plan Ignored).

This week’s meeting will also be the first since the SNB announced record losses of CHF132 billion, and declined to pay dividends to the Swiss cantons or shareholders - a potentially politically-charged decision.

SNB President Thomas Jordan may also be asked about the identity of Andrea Maechler’s successor on the Governing Board, after it was announced she will leave the SNB at the end of June 2023 to take over as Deputy General Manager at the Bank for International Settlements in September.