FXStreet (Barcelona) – Research Analysts at Nomura preview the SNB policy meeting in next week and note that a further rate cut is unlikely at the June meeting and depends on the level of CHF.
Key Quotes
“Vice Chairman Jean-Pierre Danthine commented at a business event in Geneva that the negative rate of -0.75% is significant and that it is a tool that should be used with caution. He also added that it is prudent to wait for a full analysis of its consequences, which shows that cutting rates again so soon before understanding the full effects of the current negative rates may not be the next move.”
“When it comes to the possibility of a deflationary spiral (as the CPI at -1.2% is a low, only seen during the financial crisis) the SNB’s governing board member Zurbruegg talked down the possibility of a deflationary spiral in Switzerland and also explained that he disagrees with the idea of releasing minutes for the SNB after the meeting too, saying he knows nothing of a government upset about the removal of the cap and believes the weak Q1 GDP is temporary and should pick up in Q2.”
“Although this all depends on CHF, with 25% of the CPI basket comprising goods from overseas the currency is a key component for predicting the future path of inflation in Switzerland. Looking into the details of the May inflation data, interestingly domestic inflationary pressures as a whole continued to decline (which has been in positive territory since 2012) contributing just +0.11% y-o-y (vs +0.2% previously) to the headline number, which is a trend that may concern the SNB if it does not start to pick up in the following months at some point.”
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