SNB monetary policy meeting today - preview. Expect jawboning on the CHF.

Author: Eamonn Sheridan | Category: Central Banks

The Swiss National Bank meet today, Thursday 14 September 2017.  

Announcement due at 0730GMT (oh ... the pretty much unanimous expectations is for no change to policy)

Preview - this from Bank of America / Merrill Lynch
We don't expect any policy change.
  • The depreciation in EUR/CHF to 1.14 in August without particular signs of SNB intervention is welcome news, but as CHF appreciated against the USD, the SNB is unlikely to feel in a rush to change its policy stance.
The economic rationale for very accommodative policy remains:
  • GDP growth has been rather disappointing, with average 1H growth at 0.2% q/q, and although headline inflation has returned into positive territory on the back of energy prices, nominal wage dynamics continued to soften to 0.2% y/y in 1H vs 0.6% in 2016.
We continue to see the SNB in wait-and-see mode, with policy a function of ECB decisions, similar to what we are seeing in Riksbank decisions. A very prudent approach ahead also reflects in recent comments by SNB President Jordan that "it doesn't make any sense to jeopardize the recovery by tightening our monetary policy."

And, via HSBC:

The Swiss franc has depreciated by about 5% against the euro since end-June, which should be a welcome development for the SNB.
However, we expect the SNB to keep its policy rates on hold (3-month Libor target at -1.25%/-0.25% and sight deposit rate at -0.75%) and to maintain a dovish tone ...

Indeed, recent economic data was relatively disappointing.
  • In spite of upbeat surveys, GDP growth came once again below expectations in Q2 (0.3% q-o-q, versus consensus expectations of a rise of 0.5% and after 0.1% in Q1).
  • Besides, inflation picked up in August (0.5% y-o-y from 0.3% in July) but it remains at a low level and still points to subdued domestic price pressures.
  • Finally, the drop in the Swiss effective exchange rate (about -3.5% since end-June) was less significant than was implied by the move against the euro.
As a result, we expect the SNB to repeat its view that the franc remains 'significantly overvalued'. It should also stress once again that negative rates and FX interventions remain crucial to curb the currency's strength.

(bolding is mine)

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