Swiss SNB Policy Rate (Q2) -0.25% vs. Exp. -0.75% (Prev. -0.75%); cannot rule out further rate increases

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  CHF Classification:  (prev. “Highly Valued”).


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  CHF Language: willing to be active in the foreign exchange market as necessary (prev. “… willing to intervene in the foreign exchange market as necessary, in order to counter upward pressure on the Swiss franc. In so doing, it takes the overall currency situation and the inflation rate differential with other countries into consideration).


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  Inflation Forecasts: 2022 2.8% (prev. 2.1%), 2023 1.9% (prev. 0.9%), 2024 1.6% (prev. 0.9%).


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  Conditional Inflation Forecast: The SNB’s new conditional inflation forecast is based on the assumption that the SNB policy rate is −0.25% over the entire forecast horizon (prev. “…based on the assumption that the SNB policy rate remains at −0.75% over the entire forecast horizon.)


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  Exemption Threshold: 28x (prev. 30x)


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  Economic commentary: Since March, there has been a further considerable and broad-based increase in inflation in many countries. The war in Ukraine has been a significant factor here, too, in that the prices of many commodities have risen as a result. In addition, persisting supply bottlenecks have led to further price increases for various goods

Reaction details (08:38)

In reaction to the unexpected rate increase:

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  EUR/CHF fell from 1.0368 to 1.0218 over the course of four minutes.


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  DAX Jun'22 future fell form 13,320 to 13,184.


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  Sep'22 e-mini S&P fell from 3740 to 3717.


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  Sep'22 Bund fell from 144.48 to 143.48.


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  Sep'22 Euroswiss contract prices in another 50bps increase in September.

Analysis details (08:49)

• An unexpected 50bp rate hike from the SNB. A move that exceeds even the 'hawkish' calls for a June 25bp hike going into the meeting. The driver for the SNB is the inflation situation, with the Bank noting that since the March gathering there has been a further considerable and broad-based increase in inflation in many nations. A concern that is evidenced by the new inflation forecasts only showing CPI marginally below the 2.00% target at 1.90% for 2023, when conditioned on the 50bp hike.


• Looking ahead, inflation prints will draw even more heightened scrutiny to see where the 'peak' is, with the SNB now forecasting a Q3-2022 CPI print of 3.2% an increase from the current peak inflation reading of 2.9% in the May release. Given the SNB holds open the prospect of further hikes, how the inflation readings between now and September compare to that 3.2% peak will be key to judging the likelihood of further policy increases. As it stands, market pricing looks for 50bp increases at both the September and December gatherings.


• Note, the SNB has not provided a classification for the CHF (prev. "Highly Valued").


• Reminder, the SNB will hold a press conference around 10:00BST/05:00ET; additionally, the Chairman generally appears on Business channels following this.

16 Jun 2022 - 08:30- Fixed IncomeData- Source: Reuters