It’s tough being the Swiss National Bank: After months of battling safe-haven inflows, markets want to know what the SNB will do with its 914 billion-Swiss franc ($984 billion) foreign exchange pile at its March 25 meeting.
With the franc depreciating 5% and 2.5% versus the dollar and the euro respectively year-to-date, there is no pressure to stem inflows. The pace of interventions has already fallen sharply.
Some of the franc weakness can be traced to recovery bets, but it comes at a time when Swiss bond yields are trading unusually above their German peers, global conditions are still uncertain and vaccine rollouts bumpy. Signalling a reduction in its balance-sheet size could trigger a rise in the franc, something policymakers would be careful to avoid.
The SNB is expected to keep rates unchanged -0.75%, the lowest in the world, and maintain its interventionist stance.