Author: Indradip Ghosh
Article: Original Article
Publication date: Monday, December 12, 2022
According to a Reuters survey, the Swiss National Bank (SNB) will increase the rate by 0.5% on Thursday, but the minority expects an even bigger step.
Considering inflation exceeding the SNB target by 0.5% and the difference between the interest rate that influences an already weakening franc, we can’t exclude another move by 0.75%.
Despite the inflation decrease in the two last months, SNB Chairman Thomas Jordan said that there is a “high probability” to tighten the monetary policy further, and it will likely rest. Inflation isn’t expected to fall below 2% until 2024.
Many expect that the ECB, which had already increased the rates this year by 200 basis points compared with 125 basis points of SNB, will do the same increase by 0.5% several hours after.
“We think that SNB won’t know the result of the ECB meeting in advance and likely won’t risk the big difference between rates considering that ECB can surprise by an even higher increase,” said Felix Huefner, senior European economist at UBS who waits for the next step of 0.5%. “Besides, in case of doubts we think, SNB will prefer the hawkish choice.”
9 economists from 28 predict that the SNB will raise the rate by 0.75%, and only one expects a 0.25% increase.
“A slowdown in the economy, falling energy prices, and a shift in focus towards shrinking the SNB's balance sheet argue against a significant rate hike,” said Christian Schulz, an economist at Citi. “However, the difference between interest rates with other countries is already large, and with fewer meetings, the SNB needs to take bigger steps to keep up. That's why we stick to our forecast of a rate hike from 0.75% to 1.25%.”
Forecast: decrease of USDCHF