According to Michael Pfister of Commerzbank, the Swiss National Bank (SNB) is expected to keep interest rates unchanged until the end of 2027, despite a recent uptick in inflation in Switzerland. Pfister notes that the increase in inflation has been smaller than anticipated, attributing this to subdued imported inflation and a lower-than-expected exchange rate pass-through effect [1].
Pfister states, 'Although inflation has increased again in Switzerland in recent months, the rise has been smaller than expected. Our analysis suggests one possible reason for this: the exchange rate effect is smaller than is often assumed.' He further adds, 'We therefore stand by our forecast that inflation is likely to increase only slightly, if at all.' [1]
The analysis highlights that relatively subdued inflationary pressure is a key reason for the forecast that the SNB will leave interest rates unchanged until the end of 2027. As a result, the interest rate differential between the euro area and Switzerland is expected to persist for some time [1].
Commerzbank also suggests that the EUR/CHF currency pair should benefit from this persistent rate differential in the medium term [1].
CONCLUSION
Commerzbank anticipates that the Swiss National Bank will maintain its current interest rate policy until at least the end of 2027, citing subdued inflation and limited exchange rate effects. This stance is expected to support a continued rate differential with the euro area, potentially benefiting the EUR/CHF exchange rate.