SNB to be slightly more cautious – Nomura

According to analysts at Nomura, it is clearly premature for the SNB to start tightening and expect the SNB to keep its two pillar policies, preparedness to intervene and negative policy rates, firmly unchanged.

Key Quotes

“Marked-to-market changes in the inflation forecast would lead to a higher near-term inflation forecast, but the SNB is likely to keep its mid-term projection unchanged, or it may even downgrade its mid-term inflation forecast again.”

“To avoid further CHF appreciation, the SNB will likely show a slightly more dovish stance in its statement.”

“CHF is now trading at its strongest level against EUR after the SNB changed its assessment slightly last September. The BIS-based nominal effective exchange rate also shows strong CHF appreciation recently partly because of EM currency weakness. European currencies including CHF are not trading so strongly against USD and real based effective exchange rate appreciation is more muted as inflation is much higher in the EM economies. Thus, the SNB is unlikely to change its valuation this week – our main scenario. Nonetheless, a slightly more dovish tone in its statement is likely, even after positive inflation data.”