Commerzbank's Michael Pfister argues that, with Swiss inflation remaining low and the 2022/2023 shock unlikely to recur, the SNB is now more concerned about a strong franc than inflation. Market pricing suggests nearly one rate hike by year-end, but the bank may prioritize foreign exchange stability. Recent EUR/CHF gains and the brief dip below 0.90 frame the policy debate.
The SNB is focusing on making the currency stronger.
In this situation, the expectation of nearly one full interest rate increase by the end of the year needs to be considered. The SNB is very proactive and aims to quickly address any potential inflation risks.
We therefore strongly believe that the SNB is currently more worried about the strong franc than about possible inflation risks.
In recent days, the EUR/CHF pair has started to rise again, and the drop below 0.90 appears to have been a temporary setback, at least for now.
Since the start of the war, the franc has only risen by half a cent compared to the euro, and it has actually lost a lot of value against the US dollar.
Even though the situation is different now because of the recent unusual risk of intervention, the questions today will probably still be about whether the SNB will take more active steps in the foreign exchange market in the next few months.
"We suspect it will likely avoid making clear statements, possibly due to upside inflation risks. But the SNB is also known for its surprises."
The SNB is focusing on making the currency stronger.
In this situation, the expectation of nearly one full interest rate increase by the end of the year needs to be considered. The SNB is very proactive and aims to quickly address any potential inflation risks.
We therefore strongly believe that the SNB is currently more worried about the strong franc than about possible inflation risks.
In recent days, the EUR/CHF pair has started to rise again, and the drop below 0.90 appears to have been a temporary setback, at least for now.
Since the start of the war, the franc has only risen by half a cent compared to the euro, and it has actually lost a lot of value against the US dollar.
Even though the situation is different now because of the recent unusual risk of intervention, the questions today will probably still be about whether the SNB will take more active steps in the foreign exchange market in the next few months.
"We suspect it will likely avoid making clear statements, possibly due to upside inflation risks. But the SNB is also known for its surprises."
