SNB: Early Parts of Q&A Focus on Rationale Behind Today's Unchanged Rates
Early questions in the SNB Q&A directly question why the SNB didn't cut today, despite lower forecasts, despite reduction in inflation view:
Q: With low economic growth, you've lowered your forecasts now, and also against the backdrop of the strong CHF - why didn't you cut now?
- A: We call it low growth and low inflation. Decided for unchanged as a function of our analysis. Concluded that our monetary policy is appropriate as it is currently.
Q: You've reduced your inflation forecast for next year, and also for parts of 2027, what does that mean? Possible future action needed?
- A: Regarding future action, we meet every quarter and come to a decision then. Can't give you hints here. What's important on the inflation forecast is the medium term, and that is unchanged here. Yes, in the short term some downside, but medium term more important.
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RIKSBANK: November Minutes: Some Nuances In Views Across Board (2/2)
Bunge – Neutral: Prior concerns around weak consumer sentiment readings look to have eased a little. Bunge shares the view that “there are now signs that [economic] developments are taking a turn for the better”. Although the Riksbank’s Business Survey contained weak elements around consumer confidence, the broader Economic Tendency Survey had more encouraging results.
- “Overall, I think that the outlook for an inflation rate close to the target going forward is good.”
- Bunge continues to stress that “the forecast of an inflation rate close to the target going forward is based on a recovery in economic activity”. She believes that “if confidence among households is to continue rising and the recovery is to begin in earnest, I think it is important that the labour market also develops in line with our expectations…There, the signals are rather more mixed”.
Seim – Hawkish leaning: No threat of a hawkish dissent from Seim in November, but she still sees “some risk that inflation could be higher than expected next year”.
- “Although I then [in September] advocated an unchanged policy rate of 2 per cent, this does not mean I would suggest raising the rate to that level today. We normally aim to avoid this type of erratic monetary policy and, given that the policy rate was actually cut, I assess that the current level provides the best conditions for a stable development going forward.”
- Her reasons for seeing upside inflation risks are “(i) the risk that the announced cut in VAT on food in April next year does not have the impact on consumer prices that we assumed in our forecast in September; (ii) that actual sentiment and demand pressure in the economy are not yet visible in the outcome data we have access to; and (iii) that lower public and private saving going forward could mean that the neutral interest rate becomes somewhat higher”.
- While hawkish leaning on net, Seim still acknowledges some downside risks to activity.
