SNB: Extremely cautious stance - ING

Charlotte de Montpellier, Economist at ING, explains  that the Swiss National Bank has maintained an ultra-loose monetary policy stance and still believes the Swiss Franc is “highly valued”.

Key Quotes

“It highlighted the recent appreciation of the Swiss Franc and believes the situation in the foreign exchange market is still fragile. Indeed, worries in emerging countries, discussions on the Italian budget and uncertainties surrounding Brexit have pushed the Swiss Franc, a currency considered to be a safe-haven, sharply higher against the euro.”

“At its September meeting, the SNB revised downwards its conditional inflation forecast (i.e. if monetary policy remains the same) for 2019 and 2020, signalling a dovish stance. It probably means that monetary policy will remain very accommodative in the coming years and much longer than previously expected.”

“We don’t expect any rate hike before the ECB starts raising its own rates. Given that the ECB is not expecting to hike before the end of the summer of 2019, we think the SNB won’t hike interest rates before December 2019. Moreover, given the increased risk environment expected for next year, it is even possible that the first rate increase will be postponed to 2020.”