Economists at Credit Suisse discuss the Swiss National Bank (SNB) interest rate decision and its implications for the EUR/CHF pair.

Very hawkish to hawkish

“The SNB hikes 75 bps or 50 bps, hints at further rate increases and leaves its conditional long-term inflation forecast unchanged at 2% or even revises it upwards. We assign a combined 60% probability to this scenario, 10% to the very hawkish and 50% to the hawkish setup. In both cases, EUR/CHF should trend lower towards our 0.9500 year-end target, especially should the central bank still revise its long-term inflation forecast upwards.”

Neutral

“The central bank hikes 50 bps but revises its conditional long-term inflation forecast lower. This scenario should have a neutral impact on EUR/CHF and has a 20% probability. In this case, we expect EUR/CHF to stay within a range of 0.9600-1.0100 for the near term, with the ECB and SNB rate decisions out of the way.”

Dovish

“The SNB hikes 25 bps, well below market expectations, and revises its long-term inflation forecast lower. This setup would be univocally bearish for the CHF, and we assign a 20% probability to it. In this scenario, we would expect the Franc to weaken significantly and can imagine a new EUR/CHF level of 1.0200 and even 1.0400, respectively, for Q1 2023.”

See – SNB Preview: Forecasts from five major banks, new tightening to come