SNB hikes by 50bps to 1.50% vs exp. 1.50% (prev. 1.00%); does not rule out further hikes; reiterates language around price stability and FX intervention

INFLATION

• Is still clearly above the range the SNB equates with price stability.


• Stronger second-round effects and the fact that inflationary pressure from abroad has increased again mean that, despite the raising of the SNB policy rate, the new forecast is higher through to mid-2025 than in December

GROWTH

• Despite the slight upturn in economic activity in recent months, growth is likely to remain modest for the rest of the year.

HOUSING

• Mortgage growth has remained largely stable in recent months, whereas there are signs of a slowdown in residential real estate prices. The vulnerabilities on the mortgage and real estate markets persist.

CREDIT SUISSE

• The measures announced at the weekend by the federal government, FINMA and the SNB have put a halt to  the crisis.

FORECASTS

Via SNB

Reaction details (08:35)

• Heading into the announcement modest CHF appreciation was seen and on the 50bp hike and accompanying hawkish statement EUR/CHF has dropped further from 0.9980 to a 0.9935 session low.

Analysis details (08:40)

• In short, a hawkish-hike from the SNB in contrast to the statements from the ECB and Fed in recent sessions.


• The SNB hiked by 50bp, in-line with the majority of respondents to the Reuters survey heading into the decision and the skew of market pricing, which ascribed a ~70% probability to that magnitude. Despite the 50bp hike, the SNB has further increased its inflation forecasts, with CPI now not seen dropping back into the 0-2% target band until Q2-2024 (prev. Q4-2023); in addition, the statement reiterates that further tightening cannot be ruled out. Also, the 2023 GDP growth view was upgraded to 1.0% (prev. 0.5%)


• Overall, upward adjustments to the inflation and growth forecasts, despite the 50bp hike, serve as justification and provide cover respectively for the SNB to continue its tightening cycle to bring inflation sustainably back to target.


• Market pricing currently implies 30bp of tightening (i.e. a full 25bp, plus some probability of 50bp) in June and then a 50bp hike in September to a 2.25% terminal rate.

23 Mar 2023 - 08:30- Fixed IncomeData- Source: Newswires