MNI SNB WATCH: SNB Weighs 25Bp Hike

The Swiss National Bank is set to consider raising its policy rate by 25 basis points to 2.00% when it meets on Thursday, as higher global energy costs and an expected 28% increase to domestic electricity bills offset the dampening effect of slowing growth (See MNI SNB Preview: September 2023: 25bps Hike Could Be The Last).

Against a background of elevated global inflation, June’s conditional forecast put average annual inflation at 2.2% for 2023 and 2024, and 2.1% for 2025, prompting chair Thomas Jordan to warn that further tightening cannot be ruled out.

However, with growth “optimistically” seen flatlining at 1%, average annual inflation at 1.6% - inside the SNB’s 0-2% tolerance band - and a stronger Swiss franc keeping a lid on near-term price pressures, a pause in the hiking cycle is possible, economists told MNI. (see MNI: SNB In Close Call, With 25Bp Hike On The Table-Economists)

Policymakers will as usual signal their readiness to intervene in foreign exchange markets as necessary, but there was disagreement over whether the policy statement will retain its bias towards selling foreign currency.

No change in the current tiering arrangement for the remuneration of excess reserves held by the central bank should be expected this week. Rather, any such decision is likely to be deferred until a Board successor to Andrea Maechler - who announced her June departure for the Basel-based Bank for International Settlements back in March - has been named, amid concern the process is becoming politicised.