ECB, BOE, Swiss National Bank, Riksbank interest rate decisions

Before the war on Iran began in late February, Europe’s central banks enjoyed a more benign inflation outlook as interest rates looked set to remain stable or keep falling across the region.

But the conflict has upset the economic equilibrium, threatening Europe’s energy supplies, growth and the outlook for consumer prices. Expectations for interest rates across the continent have been upended.

On Thursday, the European Central Bank, Bank of England, Sweden’s Riksbank and Swiss National Bank all deliver their latest monetary decisions. Each central bank is also likely to deliver its first comments on how the U.S. and Israel’s war on Iran, which began in late February, is likely to impact their decision-making.

Doing so, if necessary, would counter any “rapid and excessive appreciation of the Swiss franc, which would jeopardize price stability in Switzerland,” the SNB said.

The war has rendered the economic outlook considerably more uncertain, the SNB added.

“In its baseline scenario, the SNB anticipates that the increase in energy prices will raise inflation in many countries in the short term. Furthermore, global economic growth is likely to temporarily slow somewhat,” the central bank said.

While elevated volatility and aggressive fluctuations in the Swiss franc could increase the scope for foreign exchange intervention, Dani Stoilova, UK and Europe Economist at BNP Paribas Markets 360, said he does “not expect market views on the potential for SNB intervention to meaningfully dampen safe-haven inflows amid geopolitical uncertainty.”