Brief remarks from Citi, they see no change in the Bank's piolict rate, currently -0.75%. Noting also that the consensus is for no change.
- Despite more franc strength, a dovish signal from the SNB, such as raising the franc assessment to ‘overvalued’, seems unlikely as the franc has already moved away from euro parity without intervention.
- The strong franc remains convenient for the SNB for now given the prospects for a higher 2022 inflation trajectory from 1.0% to at least 2.0% (Citi 2.3%).
- More interesting is what happens thereafter – rising core inflation suggests the SNB is likely to change little in its assessment. We expect the SNB will ultimately follow the ECB on rate hikes, likely with a one-hike delay (March 2023 could be when SNB first hikes if the ECB commences lift-off in December) but if the ECB’s rate hike cycle gets stuck – then the SNB may shift towards sheet reduction.
- The SNB may only seek to weaken the franc to the 1.10 area vs EUR once global inflation rates decline next year.
