Switzerland: SNB raises rates by 50 basis points in December
At its meeting on 15 December, the Swiss National Bank (SNB) raised its policy rate from 0.50% to 1.00%, matching the increase in the European Central Bank’s policy rates that was announced on the same day.
As the SNB stated in its press release, the hike was aimed at “countering increased inflationary pressure and a further spread of inflation”. While inflation is mild by European standards and has pulled back since August’s peak, it remains above the SNB’s 2% target. Moreover, the unemployment rate is hovering close to multi-decade lows.
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”. The Consensus is for the policy rate to peak at close to 1.5% in Q3 next year.
On the outlook, analysts at ING said:
“The SNB now expects inflation to average 2.9% in 2022, 2.4% in 2023 and 1.8% in 2024. These above-target inflation forecasts for the end of the forecast horizon signal that the SNB is not done with monetary tightening. We believe that a further 50bp rate hike could take place at the next meeting in March 2023, taking the rate to 1.5%. Rates will then remain stable for an extended period.”
In contrast, the EIU are more dovish:
“With inflation starting to moderate, the SNB is likely to be approaching the end of its tightening cycle; we expect a final 25-basis-point rate increase at the central bank’s next monetary policy meeting in March 2023.”