Nomura analysts Anderson, Buckley, and Szczepaniak anticipate that the Swiss National Bank (SNB) will maintain its policy rate at 0.00% for the foreseeable future, citing persistently low inflation, which remains below 1% year-over-year, and an estimated neutral rate around 0% [1]. The analysts note that the strength of the Swiss Franc (CHF) and structural factors in Switzerland's energy mix, particularly its reliance on hydropower and nuclear energy, have contributed to keeping inflation and the SNB's policy rate comparatively low [1].
The report highlights that, unlike the European Central Bank (ECB), which Nomura expects to implement a further rate hike, the SNB is unlikely to raise its policy rate soon due to subdued inflationary pressures [1]. Historically, the SNB and ECB have often moved their policy rates in tandem, but Nomura forecasts a divergence in the current environment, with the SNB remaining on hold while the ECB tightens further [1].
The appreciation of the CHF has led to deflationary pressures in Switzerland, which has been a significant factor in the SNB's lower policy rate compared to the ECB in recent years [1]. During the global inflationary shock of 2022/23, the impact on Switzerland was mitigated by the strengthening currency and the country's energy structure, resulting in less need for aggressive monetary tightening [1].
Nomura concludes that with inflation in the 0%-1% range, the SNB's current policy rate is close to neutral or slightly accommodative, explaining why the central bank did not match the ECB's rate hikes during the recent inflationary period [1].
CONCLUSION
Nomura expects the Swiss National Bank to keep its policy rate at 0.00% for the foreseeable future, diverging from the ECB's anticipated tightening. Low inflation, CHF strength, and Switzerland's energy mix are seen as key factors supporting this policy stance.