MNI SNB WATCH: Swiss Rates Set To Be Held As Inflation Dips

The Swiss National Bank is expected to hold its policy rate at 1.75% following Thursday’s monetary policy assessment, with policymakers in wait-and-see mode as price growth trends steadily downward.

November's inflation of 1.4% - down 0.2 percentage points on the previous month - was within the the SNB’s target zone of 0-2%, making a second successive hold likely after 250bp of hikes between June 2022 and June 2023. Core was unchanged at 1.4%. (See MNI INTERVIEW: SNB To Wait Amid Eurozone Slowdown Fears)

New conditional projections will likely see average 2023 annual inflation revised down from September’s 2.2% assessment, though administered price rises may lead to a slight upward adjustment in 2024, before returning to target in 2025 and 2026.

The outlook for growth is expected to remain weak but stable at around 1%, with downside risks stemming mainly from the possibility of a deeper-than-anticipated euro area recession.

UNCERTAINTY

The SNB is not seen diverging from its previous commitment to remain active in foreign exchange markets as necessary, with a focus on selling foreign currency. Overall, SNB chair Thomas Jordan will stick to his cautious tone in light of geopolitical and energy market uncertainty.

Questions will focus on the timing of a first rate cut. If the European Central Bank cuts rates next year that could also put unwelcome upward pressure on the franc.

No changes are anticipated to the threshold above which central bank deposits are remunerated at a discount rate of 0.5% relative to the policy rate.