SNB lagging behind in the monetary tightening cycle

Economic growth in Switzerland and across the Nordics looks set to remain pretty strong over the coming years. But inflationary pressures vary significantly between countries. We think that central banks in Sweden and Norway will start to raise interest rates this year and continue hiking in 2019 and 2020. This will probably cause the Swedish krona to strengthen, while we suspect that lower oil prices will drag the Norwegian krone down despite the increase in interest rates. By contrast, we think that lingering spare capacity in Switzerland, as well as low inflation expectations, will prompt the Swiss National Bank to wait until 2020 before raising interest rates, much later than investors expect. As a result, we forecast the franc to depreciate over the coming years.