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Switzerland Monetary Policy June 2023

Switzerland: SNB raises rates by 25 basis points in June

At its meeting on 22 June, the Swiss National Bank (SNB) raised its policy rate from 1.50% to 1.75%. Moreover, the Bank reiterated its willingness to intervene in FX markets by selling foreign currency, in order to support the franc and thus tame price pressures.

The hike was aimed at counteracting inflation, which is still slightly above the SNB’s target of below 2%. Moreover, even factoring in the latest hike, the SNB still sees inflation averaging marginally above 2% over the next few years; the Bank revised up its inflation forecasts compared to its March meeting. Robust recent economic activity and a tight labor market provided the leeway for additional monetary tightening.

Looking ahead, the SNB reiterated guidance that it “cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability”. Looking ahead, some analysts see further monetary tightening later this year, while others see rates on hold. The Consensus is for rates to end the year slightly above their current level.

On the outlook, analysts at ING said:

“[The] upward revision of [inflation] forecasts is a particularly hawkish signal and suggests that the SNB will raise rates again. President Thomas Jordan almost pre-announced this at the press conference, stating that tighter monetary policy will be necessary to bring down inflation. As a result, we are now expecting another rate hike of 25 basis points in September.”

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