Nordic & Swiss

Nordic & Swiss Economics Weekly

SNB’s patience appears to be wearing thin

We argued this week that the upside for the Swiss franc was limited and its inability to push past the CHF 1.04 per euro mark suggests that policymakers’ patience may already have been exhausted. We await the publication of the weekly sight deposit by the SNB on Monday to confirm our suspicions that the Bank has seen enough. But if the SNB is to avoid adding substantially to its already-bloated balance sheet, it will be hoping – like the rest of us – that Omicron fears blow over soon. Next week, we expect data to show that mainland GDP in Norway rose by about 0.2% m/m in October and that core inflation remained well below target in November.

3 December 2021

Nordic & Swiss Economics Update

Pandemic-era lessons for the Swiss franc

Given the uncertainty around Omicron, and the revealed preference of the SNB in recent weeks to largely stay out of the FX market, we would not be surprised to see the Swiss franc rise further against the euro in the near term. But any upside is limited, and the balance of risks is tilted towards depreciation in 2022. In view of the wider interest, we are also sending this Nordic and Swiss Economics Update to clients of our FX Market Service.

1 December 2021

Nordic & Swiss Data Response

Switzerland CPI & Manufacturing PMIs (Nov.)

Inflation surprised on the upside in Switzerland in November, but this was due to temporary factors and it is likely to fall back to below 1.0% over the coming months. The upshot is that there is next to no chance of the SNB tightening policy anytime soon, and the big question mark is when it might intervene.

1 December 2021

Key Forecasts

Key Market Forecasts

Forecasts

Forecasts

Latest

End 2021

End 2022

End 2023

Latest

End 2021

End 2022

End 2023

Swiss policy rate

-0.75

-0.75

-0.75

-0.75

Swiss fr/euro

1.04

1.04

1.10

1.12

Swe. repo rate

0.00

0.00

0.00

0.00

Swed. Kr/euro

10.30

10.30

9.75

9.75

Nor. depo rate

0.25

0.50

1.50

2.00

Nor. Kr/euro

10.30

10.30

10.00

10.00

Den. depo rate

-0.60

-0.60

-0.60

-0.60

Dan. Kr/euro

7.44

7.44

7.45

7.46

ECB depo rate

-0.50

-0.50

-0.50

-0.50

US$/euro

1.13

1.15

1.15

1.20

Sources: Refinitiv, Capital Economics


SNB’s patience appears to be wearing thin

Nordic & Swiss Economics Weekly

4 December 2021

Our view

As highly-open economies, supply shortages are likely to weigh on industrial activity in the Nordics in the near term. But with GDP already back to, or above, pre-pandemic levels, and house price gains exacerbating financial stability fears, policymakers will remain focused on dialling back stimulus measures. Having started to tighten policy in September, the Norges Bank is all but certain to raise interest rates again in December, and we expect it to tighten by more than is priced into the market next year. Meanwhile, although the Riksbank is likely to leave its repo rate on hold at zero throughout our forecast horizon, we think that it will allow some of its stock of mortgage-covered bonds to roll off the balance sheet next year.

Latest Outlook

Nordic & Swiss Economic Outlook

Well placed to navigate choppy waters

As highly-open economies, Switzerland and the Nordics are far from immune to the issues of slowing global growth and supply-chain shortages that are currently vexing investors. Sweden is perhaps most exposed; the impressive rebound there looks to have peaked in July and momentum will fade in H2 2021.

20 October 2021