What to expect from the SNB – Bank of America
Bank of America discussed its expectations for tomorrow’s SNB meeting in a recent note to clients.
Bank of America noted:
We expected the SNB to keep its policy on hold, ie, the deposit rate at -75bp paired with discretionary FX interventions. Unlike the ECB, where the reaction function has become more opaque again, we are relatively confident that we have understood the SNB’s: shielding the economy from fast exchange rate appreciation. In this context, changes to policy instruments are unlikely any time soon. FX interventions are more powerful than rate cuts, and with tiering designed to fit the Swiss banking sector, “reversal rate” considerations don’t bite. Inflation should return to positive territory over coming months, but prove insufficiently dynamic to prompt a policy rethink.
We expect the SNB to be way down the list of central banks that will normalize policy. As this gap widens, the flow of fund pressures from the Swiss financial account will also rise.
Bank of America noted:
We expected the SNB to keep its policy on hold, ie, the deposit rate at -75bp paired with discretionary FX interventions. Unlike the ECB, where the reaction function has become more opaque again, we are relatively confident that we have understood the SNB’s: shielding the economy from fast exchange rate appreciation. In this context, changes to policy instruments are unlikely any time soon. FX interventions are more powerful than rate cuts, and with tiering designed to fit the Swiss banking sector, “reversal rate” considerations don’t bite. Inflation should return to positive territory over coming months, but prove insufficiently dynamic to prompt a policy rethink.
We expect the SNB to be way down the list of central banks that will normalize policy. As this gap widens, the flow of fund pressures from the Swiss financial account will also rise.