Swiss National Bank likely to maintain interest rates at 1.75% next week after Swiss inflation eases in November.
– Swiss inflation dropped to 1.4% year on year in November, down from 1.7% in October, remaining within the SNB’s target range.
– UBS economist Maxime Botteron believes that the Q4 2023 inflation rate will likely fall below the SNB’s forecast of 2.0% year on year, making it unlikely for the SNB to raise its policy rate on 14 December.
– Market currently predicts a 69% probability that the SNB will keep rates unchanged next week, with a 31% chance of a rate cut to 1.5%.
Crafting the article:
Swiss National Bank Likely to Maintain Interest Rates Amid Easing Inflation
The Swiss National Bank is expected to keep its interest rate on hold at 1.75% next week, as Swiss inflation continues to ease, according to analysts. In November, Swiss prices rose by 1.4% year on year, down from 1.7% in October, marking the sixth consecutive month that inflation has remained within the SNB’s target range of 0-2%.
UBS economist Maxime Botteron expressed that the Q4 2023 inflation rate is likely to fall below the SNB’s forecast of 2.0% year on year, making it improbable for the central bank to raise its policy rate on 14 December. This sentiment is echoed in the market, where there is a 69% probability that the SNB will maintain its current rates, with a 31% chance of a rate cut to 1.5%.
SNB Chairman Thomas Jordan emphasized the central bank’s commitment to closely monitoring inflation and tightening monetary policy if necessary. The market has also priced in a 53% probability of rates being cut to 1.5% in March 2024, indicating a cautious approach to potential rate adjustments.
EFG International, a Swiss bank, noted that the November reading, the lowest level for Swiss inflation since late 2021, suggests that the SNB is likely to hold rates. The moderation in price, particularly in energy prices, points to Swiss inflation remaining low in December, despite rising rents. This data supports the view that the SNB policy rates have peaked for this cycle, with potential scope for rate cuts in 2024.
Overall, the latest data on Swiss inflation and the market’s expectations indicate that the SNB is likely to maintain its interest rates at the upcoming meeting, with potential considerations for rate cuts in the future. As the central bank continues to navigate the evolving economic landscape, the focus remains on ensuring price stability and supporting sustainable growth in the Swiss economy.