SNB monetary policy preview

Swiss National Bank will announce its monetary policy decisions at 8:30 GMT.

Economic conditions -

• Switzerland GDP is around $ 650 billion and growth rate is moderately well at 1.90% annum.
• During 2011 European debt crisis inflation fell to -1%, however came to positive ground in 2014 gradually. However since mid of last year inflation decelerated to negative territory and hovering close to -1%.
• Bond yields are negative up to 10 years.
• Switzerland enjoys high current account balance, 12.5% of GDP.
• Unemployment rate is stable close to 3.5%.

Current policy -

• SNB has kept policy rates at -0.75% and three months target range for libor at -1.25/-0.25%.
• SNB abandoned the Euro peg of 1.20 in January 2015, days before ECB announced QE.

Challenges -

• Swiss franc remained reasonably high priced and even higher after SNB scrapped the Euro peg. This might hurt the export oriented economy.
• Slowdown in Europe and China, two of its biggest trading partner might dampen the economy.

Expectation today -                                                                                                                                                   

• SNB may turn out to be a gainer over ECB bond purchase as it holds vast amount of bonds bought at a much higher yield. Removing the Euro peg may be was necessary for SNB to survive or make profit. However the bank lost credibility.
• Without an action, today's meeting may turn out a nonevent.
• However SNB would like the Franc to depreciate as it may be overvalued but might choose a more opportune moment to introduce further action.

Franc is trading at 0.99, may strengthen more if no cut is introduced today, however such move is expected to be temporary and market might look for queues elsewhere.