UBS chief economist, Daniel Kalt, writes in a report on economic outlook
- Expects first SNB rate hike at the start of 2020, similar to that of the ECB
- CHF still overvalued
- Further strength poses danger for further slowdown in Swiss economy
- Rate hikes by SNB, ECB will likely be reflected by rising yields towards end-2019
- Rates to remain historically 'very low' for next few years even after 2020
- Initial rate hike unlikely to trigger panic in the bond market
- Expects long-term yields to rise in a fairly mild manner
That for me is something you'd call wishful thinking. Last year, Swiss banks previously had forecasts that the SNB will raise rates this year and look at where we are now. Inflation in Switzerland is still much closer to 0% than it is to 2%, so it's tough to make a strong argument for any monetary policy normalisation by the SNB.
Meanwhile, the ECB is also seen unlikely to raise rates any time soon so expect that to be the case for the SNB as well. If anything else, they may very well have to wait 3-6 months after the ECB does so - if we ever come to that - before reacting themselves in fear that the franc will strengthen against the euro.
