STIR: Slight Hawkish SNB Repricing As Tschudin Comments Garner Attention

Market expectations of near-term SNB policy edged hawkishly overnight on late comments yesterday from SNB's Tschudin, with implied odds for an outsized 50bp cut at the upcoming meeting now standing at around 1/4 (from about 1/3 yesterday). Through December 2025, markets price around 56bps of cuts (broadly unchanged from yesterday).

• Recapping, the key comments were
  • a) a reiteration of the previous rhetoric that inflation "can" move into negative territory temporarily in Switzerland, and that the SNB is focussed on mid-term price stability - that is noteworthy as Swiss CPI indeed moved below zero in the May for the first time since 2021.
  • b) an acknowledgement that market expectations for interest rates have fallen but that economists don't expect negative SNB rates in this cycle.
• Overall, Tschudin's comments lean marginally hawkish through implying the SNB is not panicking on yesterday's sub-zero CPI print. Despite this, Tschudin did not close the door for an outsized move at the upcoming meeting - "the situation changes every day, we will have to look and see what to do at next meeting".
• As Tschudin said, the analyst base case is for a regular 25bp cut to 0% at the June SNB meeting. Key comments we've seen following yesterday's CPI data:
  • CIBC: "We anticipate that the central bank remains acutely aware of competitiveness pressures and disinflationary tendencies [...] given such concerns we remain mindful of the return to negative rates, albeit we only expect such a scenario in Q3."
  • Danske: "We expect a final 25bp cut at the next meeting [...] and the SNB to opt for FX intervention before resorting to negative territory. Growth data to the strong side also supports this [...] the risk of a larger 50bp cut is definitely on the table following the print yesterday further amplified by the negative effects from the trade war with Switzerland set to be hit by a 32% tariff rate."
  • ING: "We expect the SNB to cut its policy rate by 25 basis points at its next meeting on 19 June, with further cuts likely. Based on current data, a return to negative interest rates before year-end appears increasingly probable. Our base case includes a second 25bp cut in September, bringing the policy rate to -0.25%. While the SNB would prefer to avoid deeper cuts, a 50bp reduction in June cannot be ruled out."
  • Wells Fargo: "We now see one more 25 bps SNB rate cut, to a policy rate of 0.00%, at the June 19 meeting. Beyond the June meeting, we see a less persuasive case for further easing, as the Swiss economy has shown a degree of resilience. In our view, further rate cuts after June would likely only materialize if there was a significant deceleration in economic activity and if we saw deflation become evident in underlying price measures as well. At this time, we believe that 0.00% will be the low for this monetary easing cycle."