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Switzerland Monetary Policy March 2022

Switzerland: SNB maintains ultra-loose monetary policy in March

At its meeting on 24 March, the Swiss National Bank (SNB) left its policy rate and the interest rate on sight deposits at minus 0.75%—the world’s lowest. Moreover, the Bank reiterated its continued willingness to intervene in foreign exchange markets “as necessary” to temper the value of the franc.

The Bank’s move was aimed at supporting the economy in the face of uncertainty spilling from the war in Ukraine, as well as averting upward pressure on the franc, which has appreciated sharply against the euro in the last few months due to greater safe-haven demand. Moreover, while price pressures in Switzerland have intensified recently—with the Bank raising its inflation forecasts in turn—they remain much lower than in most European peers. As such, the SNB was under little pressure to hike.

Looking ahead, the Consensus if for the SNB to keep rates unchanged this year despite the war in Ukraine potentially stoking inflation ahead. That said, the panel is fairly split on the outlook for the next year, with some analysts expecting hikes in line with likely tightening by other major central banks—including the ECB—and others seeing rates unchanged.

Maxime Botteron, economist at Credit Suisse, commented:

“The SNB has basically kept its monetary policy stance unchanged. However, for the first time in a very long time, the SNB notes rising inflation risks. In our view, this is a small step toward a slightly more hawkish tone. As we expect inflation to decline below 2% in late 2022, we see no urgency for a tighter monetary policy stance for the time being. We continue to forecast the first policy rate hike in June 2023.”

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