Newsquawk

Swiss SNB Policy Rate (Q2) 1.75% vs. Exp. 1.75% (Prev. 1.5%): cannot be ruled out that additional rises in the SNB policy rate will be necessary

RATES

cannot be ruled out that additional rises in the SNB policy rate will be necessary

FX

In the current environment, the focus is on selling foreign currency

INFLATION

Inflation has again increased over the medium-term.

The lower oil and gas prices and the stronger Swiss franc are having a dampening effect over the short term.

From 2024 onwards, the new forecast is higher than in March. The reasons for this are ongoing second-round effects, higher electricity prices and rents, and more persistent inflationary pressure from abroad.

GDP

SNB expects modest growth for the remainder of the year. Subdued demand from abroad, the loss of purchasing power due to inflation, and more restrictive financial conditions are having a dampening effect.

Reaction details (08:40)

In reaction to the disappointment in some quarters from the SNB not delivering a 50bps move amid the softer 2023 inflation profile, as well as comments on FX selling, EUR/CHF rose from 0.9791 to 0.9830 before extending the move to 0.9837.

Analysis details (08:40)

In short, the decision was as-expected, though disappointed some looking for a 50bps hike.

Decision to hike by 25bps was as a result of recent inflationary developments and subsequent commentary from officials at the Bank with Chairman Jordan stating that inflation is more persistent than thought with both second- and third-round effects being seen.

The reason to step down to a 25bps increment was likely based on the marked pullback from the prior in May’s CPI data.

The hawkish takeaway from the release came via the higher inflation forecast for 2024-2025, which could be indicative of a higher for longer regime.

Note, ahead of the release, 23/33 polled thought the June hike will be the last, given the trajectory of inflation, though the SNB will likely remain data-dependent. Market pricing heading into the announcement saw the terminal rate at around 2.13% in March 2024, it is now seen at 2.21% in March.

22 Jun 2023 - 08:30- ForexImportant- Source: Reuters