SNB’s First ‘Soft Policy’ Rate Summary Leaves Analysts Split

(Bloomberg) — The Swiss National Bank’s first attempt to embrace more transparency over its policy decisions received a mixed welcome from observers seeking clues on possible interest-rate cuts and franc intervention.

The summary of its Sept. 25 meeting discussion released on Thursday underwhelmed some strategists and economists for its scant detail on the market and the prospect of negative borrowing costs, while intriguing others with its glimpse on the deliberation process for a traditionally secretive institution.

“I find it useful and it certainly brings the SNB’s communication closer in line with other major central banks,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “This report can also act as a soft policy tool, shaping expectations through forward guidance, enhancing transparency and communication, and making sure that the markets align.”

The document is part of a transparency push by President Martin Schlegel to emulate bigger peers such as the Federal Reserve, which regularly disclose minutes of policymakers’ meetings. That ambition is limited for the SNB by its need to keep individual positions of its three rate-setting officials private and maintain a united front in public.

The summary explained the thinking behind the decision to halt easing, avoiding a return to negative borrowing costs by keeping its interest rate at zero. It detailed how officials decided against such a cut as they assessed their stance to be stimulative enough to stoke inflation.

“The need for potential further monetary easing was judged as not being ‘appropriate’ at the current juncture,” said Gero Jung, head of investment strategy at Banque Cantonale du Valais. “In the absence of major shocks, the current status quo of a zero policy rate remains the most likely scenario.”

What’s Missing

For Alessandro Bee, an economist at UBS in Zurich, the document offered little new information but did still offer some revelations.

“What was not included was more striking — for example, there was no discussion of alternative scenarios, such as introducing negative interest rates,” he said. “The SNB doesn’t want to give away any possible surprises. So it’s understandable that it includes fewer considerations in its summary than other central banks in their minutes.”

Market expectations were muted before the release, given the SNB’s circumspect approach to messaging. But considering the central bank’s past record of jolting traders with surprise decisions, it still attracted keen readers at a time when the franc is close to a decade high against the euro and UBS economists reckon the central bank may now even be intervening.

Among mentions of foreign-exchange markets, officials observed that the currency had strengthened against the dollar, but was “relatively stable” versus the euro. They said that geopolitical shocks could drive inflows into the franc, but that the “relatively high” differential between Swiss rates and those of major peers was countering that effect.

“This hints at a preference for stability, or curbing volatility rather than explicitly countering further appreciation, especially as they see policy as accommodative,” said Nomura strategist Dominic Bunning.

That would chime with the SNB’s shift toward a more judicious approach to intervening compared to its large-scale franc sales of the past. It also conforms to its more restrained approach toward commenting on the currency, as opposed to the labels such as “highly valued” that it previously used to describe its level.

Jane Foley, head of FX strategy at Rabobank, hinted that the summary is likely to have been underwhelming to traders.

“If the market was hoping that the SNB would lay bare its thoughts regarding the risks associated with negative interest rates, it will be disappointed,” she said.

Francesco Pesole, an FX strategist at ING, also found the insights limited.

“Overall there isn’t much in those minutes from an FX angle,” he said. “It looks like there’s no appetite for negative rates and a relatively upbeat tone on the Swiss economy despite tariffs.”

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