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4 Sep 2015
SNB rates on the spotlight – Rabobank
FXStreet (Edinburgh) - Analyst Emile Cardon at Rabobank has evaluated the prospects for the SNB regarding its benchmark rates.
Key Quotes
“Although the international environment has become more uncertain, there have been some positive signals from Switzerland. After a contraction in the first quarter, the second quarter of the year turned out to be much better than expected (0.2% q-o-q versus a -0.1% median expectation among market participants). This means that Switzerland avoided a technical recession”.
“Meanwhile, total sight deposits increased by CHF 1 billion in August, which is a sign that the SNB has not intervened frequently during the tensions in August. Given that the Swiss franc weakened vis-à-vis its major trading partners, this indicates that the currency is no longer the first choice as a safe haven for investors”.
“In a recent interview, SNB president Thomas Jordan said that he sees no reason for a change in policy, but that the SNB stands ready to intervene. This means that the rate on sight deposits will probably not be adjusted downwards and will remain at -0.75%, when the SNB convenes on 17 September. The central bank will try to calm the markets, if necessary, via verbal intervention”.
“Another option is the adjustment of the cyclical capital buffer. The main worry for the SNB remains inflation”.
“In his Jackson Hole paper, President Jordan said that Swiss deflationary pressures have a different origin than those of countries such as Japan. Indeed, Switzerland is still feeling the pain from the sharp appreciation in previous years”.
Key Quotes
“Although the international environment has become more uncertain, there have been some positive signals from Switzerland. After a contraction in the first quarter, the second quarter of the year turned out to be much better than expected (0.2% q-o-q versus a -0.1% median expectation among market participants). This means that Switzerland avoided a technical recession”.
“Meanwhile, total sight deposits increased by CHF 1 billion in August, which is a sign that the SNB has not intervened frequently during the tensions in August. Given that the Swiss franc weakened vis-à-vis its major trading partners, this indicates that the currency is no longer the first choice as a safe haven for investors”.
“In a recent interview, SNB president Thomas Jordan said that he sees no reason for a change in policy, but that the SNB stands ready to intervene. This means that the rate on sight deposits will probably not be adjusted downwards and will remain at -0.75%, when the SNB convenes on 17 September. The central bank will try to calm the markets, if necessary, via verbal intervention”.
“Another option is the adjustment of the cyclical capital buffer. The main worry for the SNB remains inflation”.
“In his Jackson Hole paper, President Jordan said that Swiss deflationary pressures have a different origin than those of countries such as Japan. Indeed, Switzerland is still feeling the pain from the sharp appreciation in previous years”.