SNB, BoE and ECB rate decisions are the focuses of the day and all are expected to deliver 50bps rate hikes.
There are some talks that given SNB only meets every quarter, it may surprise the market by maintaining the pace of 75bps. But the balance is more towards a 50bps hike to 1.00%. Tightening bias should be maintained while some focuses will be on the rhetoric on Swiss Franc exchange rate.
BoE is expected to raise policy rate by 50bps to 3.50%. Some attention will be on the voting. Last month, only seven MPC members voted for the 75bps hike. Swati Dhingra voted for 50bps, while Silvana Tenreyro voted for 25bps.
ECB should raise the main refinancing rate by 50bps to 2.50%. Additionally, it would announce some key principles regarding quantitative tightening, but the details main only come later, probably at February’s meeting. The new economic projections would also be watched closely on the central banks view on the path of slowing inflation and recession.
Here are some previews for SNB, BoE and ECB:
- SNB Meets But Developments Elsewhere Could Carry More Weight for Swissie
- BoE Set for Another Rate Hike, But Divisions May Widen
- Bank of England Preview
- Bank of England Preview – Back to 50bp as BoE Nears End of Hiking Cycle
- ECB Rate Decision, How Sure is 50bps Hike?
- ECB Preview: Will Lagarde Deliver a Hawkish Surprise?
- Will the ECB Signal the Need for More Rate Hikes?
- ECB Preview – A Hawkish 50bp
SNB hikes 50bps to 100%, cannot rule out more
SNB raises the policy rate by 50bps to 1.00% as widely expected, to “countering increased inflation pressure and a further spread of inflation”. The central added that additional rate hikes “cannot be ruled out”. It also maintained the willingness to be “active in the foreign exchange markets as necessary”.
In the new conditional inflation forecast based on 1.0% policy rate, inflation forecasts was lowered from 3.0% to 2.9% in 2022, left unchanged at 2.4% in 2023, and raised from 1.7% to 1.8% in 2024. Inflation forecast was indeed raised from Q3 2023 through Q4 2024.
The higher inflation forecasts was “attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index.”
Regarding GDP growth, SNB expects its to be at around 2.0% this year. But weaker overseas demand and higher energy prices are likely to “curb economic activity marked in the coming year”. SNB expects GDP growth to slow to 0.5% in 2023.
Full statement here.