EUR / CHF: SNB may raise interest rate only after the ECB, UniCredit believes

Dov Herman

3 years ago

This week we will face a whole series of monetary decisions of the largest central banks, after we got to know the position of the ECB a week ago. Among them is the Federal Reserve, which is likely to sustain the process of aggressive monetary tightening. The SNB should start normalizing as well, but not as early as at Thursday’s meeting, UniCredit analysts say.

EUR / CHF: UniCredit expects SNB to postpone interest rate hike

The euro exchange rate against the Swiss franc remains above parity pending a monetary decision from the Swiss central bank. Perhaps the time for the SNB to start its policy tightening cycle is approaching, but UniCredit economists believe not this week. – Thursday’s meeting of the SNB gains more and more importance after the discussion on the normalization of monetary policy also flared up in Switzerland, where inflation also accelerated. – commented UniCredit analysts. CPI inflation in Switzerland has risen rapidly, but remains well below levels seen in many other countries: in May it was just 2.9% year-on-year. A few days ago, the chairman of the SNB, Thomas Jordan, warned that the bank is ready to fight inflation and will not hesitate to raise rates if necessary, and such a political position is to be confirmed on Thursday. Despite this, UniCredit is skeptical of the SNB’s hawkish stance in just a few days. – The start of normalization is getting closer, also for the SNB, given the current very low level of the Swiss interest rate of -0.75%, but its actual start is unlikely to happen soon. – experts from UniCredit pointed out.
Also check: Dollar up, gaining strength ahead of the Federal Reserve meeting – SNB must be careful about restoring normal rates to avoid further appreciation of the Swiss franc. – they added. – This significantly reduces the likelihood that the SNB will make the first interest rate hike before the ECB, which makes the next quarterly meeting on September 22 a more realistic date to start it.

The market is already pricing in the return of interest rates above 1% in three years.
EUR / CHF exchange rate. Source: tradingview.com – The normalization of politics is likely to be more intense in the euro area than in Switzerland, which should help the EUR / CHF return to 1.08 in the coming quarters. – concluded the analysts of the currency market from UniCredit.
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