**As seen in Risk In The Week report 06/14/24, subscribe at cablefxm.co.uk/reports
It was debated whether the SNB would cut rates or not in March, for this reason, the decision to reduce the policy rate came to surprise some market participants. The first step of the SNB's easing cycle took the policy rate down to 1.5%, the central bank now sees growth rising by 1.3% while inflation eases to 1.1% next year. Communications showed the central bank thinks high service prices drive inflation while a drop in goods prices helped the CPI come back to target. On rate cuts, the SNB said that easing policy would help them ensure that monetary conditions remain appropriate as inflation was said to remain in a stable range. On FX, the desk at HSBC thinks the SNB has turned into a more neutral bias as May reserves fell by around three billion CHF, they said this suggests earlier sales of franc have eased. HSBC added they are skeptical of the SNB turning into CHF buying, but they don't think that a 'weak franc' stance is sustainable for the central bank. Strategists at Rabobank said it is more likely that the SNB will cut rates this week after the EU parliamentary election impact on markets, CHF inflows on risk-off trading took the euro-franc cross to the lowest since February. Rabo said the SNB will be more worried about the disinflationary impact of a strong CHF than it is about the possibility of sticky price pressures. UBS analysts disagree and expect the SNB to leave policy unchanged in June, they still expect the central bank to lower policy to 1.0% eventually, but the pace is now expected to be slower than initially anticipated.
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