BofA Global Research expects the Swiss National Bank (SNBN.SW) to hold its key rate at 0% at its Thursday monetary policy meeting and until 2028, noting that its inflation forecasts are still "comfortably" within its 0% to 2% target range.
"There is a risk that the SNB drops the narrative on CHF in order to leverage FX overvaluation as a means to insulate the economy from global energy prices. Our base case remains that the SNB stays on hold until 2028, in contrast to market pricing. We doubt that the SNB will or wants to out-hawk the market, which leaves a tug of war for CHF. We think the communication should reinforce the SNB's determination to preserve full optionality and retain all policy instruments at its disposal," the research firm said Wednesday in a preview note.
Analysts highlighted that inflation in Switzerland has so far "remained low by international standards" despite some upside pressure over the near term amid higher energy prices.
"Whilst there is an argument that the SNB will warn about the upside risks of inflation and potentially revise its forecasts, we do not think this will include projections for a rate hike. More likely, we think the risks are that the SNB will leverage on the FX rate by dropping some of the verbal rhetoric that has been evident in speeches and policy decisions," BofA added.