BNS: Minor hikes ahead, but another 75 basis point hike in December not ruled out — Wells Fargo

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As expected, the Swiss National Bank (SNB) raised the official interest rate by 75 basis points on Thursday. Wells Fargo analystsbelieve the SNB will continue to tighten monetary policy but with smaller rate hikes, amid slower growth prospects and somewhat more contained inflation next year.

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“The announcement’s forward guidance was not as aggressive compared to comments from many other global central banks. Instead of signaling a sharp rise in interest rates, the SNB repeated that further rate hikes cannot be ruled out.” of official interest of the SNB to ensure price stability in the medium term. In addition, the central bank indicated that it remains ready to intervene in the foreign exchange market when necessary.”

“With updated SNB forecasts showing average annual inflation of 2.4% for 2023 and 1.7% for 2024, we believe the central bank will continue to tighten monetary policy, although further rate hikes are unlikely to be needed given that expects inflation to approach target by the end of 2023.”

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“Although our base case is for smaller rate hikes in the coming quarters, we wouldn’t completely rule out a 75 basis point rate hike in December. Given that the SNB only has one monetary policy meeting per quarter, half that the ECB, the central bank could choose to make a higher rate hike to take this into account.The central bank has also repeatedly underlined its commitment to support the franc to soften the blow of rising import prices and inflationary pressures. While its willingness to intervene in currency markets is an important policy lever, large rate hikes supporting the currency could also complement these actions.”

Source: Fx Street

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