Swiss Franc: SNB preview signals steady policy – DBS

DBS Group Research economist Philip Wee anticipates the Swiss National Bank (SNB) will maintain its policy rate at 0% during the September 24 meeting, despite increasing energy costs and modest inflation growth. However, he believes there is potential for an early upgrade in inflation forecasts. Wee notes that Switzerland's economic growth has improved and the CHF has faced fewer pressures against the EUR and GBP.

The SNB doesn't feel compelled to tighten policies like the US Federal Reserve and the European Central Bank at the same meeting. The bank is expected to raise its short-term inflation forecast due to the lingering effect of high energy prices on the economy and ongoing concerns in the Middle East. The SNB may also focus more on the second-round effects of inflation, such as those in processed foods, transportation, tourism, and restaurants.

The severity of any forecast upgrade will depend more on whether the SNB believes the oil shock is influencing long-term inflation rather than just short-term inflation. The bank may also adjust its language on foreign exchange intervention, as its willingness to do so has waned since June. In June, the SNB indicated it was "more willing to step in to prevent a rapid and excessive CHF appreciation," emphasizing price stability and overall economic activity.

However, this concern has since diminished. Switzerland's State Secretariat for Economic Affairs has boosted its 2026 growth forecast to 1.7% from 0.9% in June. Growth in the second quarter of 2026 (Q2 2026) accelerated to 1.9% quarter-over-quarter (2.8% year-over-year) from 0.6% QoQ (0.5% YoY) in Q1 2026. The CHF has shed more than half of its post-Liberation Day gains against the EUR and GBP.

The SNB may view the Fed and ECB's rate hikes as providing a stronger counterweight to safe-haven demand for the CHF.