Swiss National Bank: Policy pause and FX stance – Nomura

Nomura analysts Josie Anderson, George Buckley, Andrzej Szczepaniak and David Seif expect the SNB to keep its policy rate at 0.00% at the 18 June meeting. They highlight low Swiss inflation, mixed activity data and ongoing Iran war uncertainty. The team also anticipates continued strong guidance on FX intervention and sees the policy rate unchanged for the foreseeable future.

SNB seen on extended policy hold

"We expect the SNB to leave its policy rate unchanged at 0.00% at its June meeting. Inflation has accelerated, driven higher by energy prices, but core inflation remains low. A key question is whether the SNB will repeat its wording from the last meeting that its “willingness to intervene in the foreign exchange market has increased” as opposed to the more typical statement that it “remains willing to be active in the foreign exchange market as necessary”."

"Since the last meeting, speeches from SNB policymakers have emphasised the Bank’s increased willingness to intervene in FX markets. These statements include Chairman Schlegel (on 3 June) saying that the “Iran war could increase pressure on [the] franc” and the SNB has “increased willingness to intervene in FX”. Antoine Martin, Vice Chairman of the Governing Board,also noted on 21 May that theSNB has elevated willingness to intervene in FX (sources: Bloomberg)."

"Although CHF has depreciated against EUR since March, in light of the continued communication highlighting the increased willingness to intervene and ongoing uncertainty from the Iran war, we expect the statement at the June meeting to again express increased willingness to intervene in the FX market. At the end of the month, the SNB will release data on FX interventions in Q1, which we believe will likely show increased intervention against CHF strength in the quarter."

"The low rate of inflation also limits the need for a higher policy rate any time soon. The need for FX intervention to prevent too much disinflationary pressure remains an important topic, and we believe the SNB is likely to continue to signal an increased willingness to intervene, but CHF has fallen from recent highs against EUR. Overall, our central forecast is for the SNB’s policy rate to remain at 0.00% for the foreseeable future."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)