MNI SNB WATCH: On Hold Despite Modest Inflation Upside

The Swiss National Bank is set to leave its key Policy Rate unchanged at 0% Thursday, with markets expecting no change in its rate settings this year.

April and May inflation slightly exceeded the SNB’s March projections, boosted not only by rising energy prices but also by private services, a trend policymakers have monitored closely in the past. But inflation remained below the midpoint of the defined range of price stability, and the average is in line with the SNB’s March forecast for the second quarter.

While market pricing sees no change in rates before a 25-basis-point hike in March 2027, some initial signs of economic momentum have raised the chances of less expansionary policy before the end of 2026.

ECONOMY

Risks of second-round effects from the energy shock persist, with the economy still showing resilience and a tightening labour market. According to some analysts, the increase in job vacancies and the stabilisation of the unemployment rate have taken the vacancy rate to mid-2023 levels and could mean continued inflation increases in coming months.

PMI and KOF sentiment surveys also showed growing business confidence, supported by a recovery in new orders. Companies report upward pressure on input prices similar to that of 2021 and 2022.

FOREX

The franc has depreciated modestly since the March meeting, when the SNB shifted its FX language to signal "increased" willingness to intervene, and with increased rate hike expectations for the ECB and the Federal Reserve. The franc was last at 1.2620 vs the dollar, versus USD1.3000 at the time of the March meeting.

Barring new shocks, the exchange rate appears less of a concern than in the past, but, with the SNB having made clear the forex channel is likely to be its main policy tool in coming quarters, no significant change is expected in the statement language.