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SNB holds policy rate at zero, supporting USD/CHF and EUR/CHF
Brown Brothers Harriman said the SNB pushed back against market pricing for 50 to 75 basis points of hikes in the next 12 months, leaving CHF weaker versus the US and euro area.
Brown Brothers Harriman said the Swiss franc underperformed after the Swiss National Bank kept its policy rate at 0.00% for a fifth consecutive meeting and resisted market expectations for future increases. FXStreet reported the Swiss central bank argued that monetary policy remains appropriate to keep inflation within its price stability mandate of less than 2% per annum.
BBH noted that inflation forecasts are still below 1% over the forecast horizon, even after the SNB lifted its projection slightly due to higher oil product prices, according to the FXStreet summary. With the yield gap versus the US and Eurozone widening, BBH expects this to keep upside pressure on USD/CHF and EUR/CHF pairs.
In particular, BBH cited SNB pushback against market pricing of 50 to 75 basis points of hikes over the next 12 months. The note framed the decision as “stuck at ground zero,” helping explain the franc’s relative weakness.