BNY’s analysis by Geoff Yu on the Swiss Franc (CHF) indicates that the Swiss National Bank (SNB) is unlikely to adopt negative rates in the current policy cycle. The report emphasizes that the SNB will wait for its March conditional inflation forecast before making any policy changes, as current demand for the CHF is not driven by Eurozone factors.
SNB’s policy outlook and CHF strength
“In our view, the SNB will not overreact and will wait for its March conditional inflation forecast, given that current demand for the franc is not driven by Eurozone- or EUR-based factors.”
“Our base case is that negative rates will not be adopted at all for the current policy cycle, though it will remain an option if there is clear deterioration in inflation and inflation expectations.”
“Before cutting benchmark rates into negative territory, however, we believe the SNB has ample room to utilize its balance efficiently to engineer far lower money market rates.”
