MNI SNB Preview - June 2022: Laying the Groundwork for September

Executive Summary:

• Policy expected unchanged, but seen signaling Sept hike
• FX language could be first sign negative rates will be reversed
• Stark Eurozone-Swiss inflation differential to weigh on expectations further out

MNISNBPrevJun22.pdf

The SNB are expected to lay the groundwork for the first change to the policy rate in seven years at this week’s meeting. But the bank will likely hold rates for a further three months so as not to add to market uncertainty by prematurely widening the ECB/SNB policy rate differential and inducing FX market volatility.

March’s inflation forecast round put CPI above target this year for the first time in years, but the actual CPI turnout since then has been higher than the bank had expected. This should lead to a substantial upgrade to inflation projections this month, pressing the bank to step up their language and signal an end to negative rates by the end of 2022.