Earlier today, the latest CPI update from Switzerland matched economists’ expectations, standing still at the 0.2% level and rather confirmed the market views that SNB policymakers will most likely vote to keep rates unchanged at their upcoming quarterly policy decision in September.
The central bank however is expected to face challenges in how they deploy their policy strategy in the foreseeable future, as the impending impact from Trump’s harsh tariffs imposed on the Swiss economy nears.
Even though price pressures appear non-threatening and stay marginally north of the 0% inflation/deflation threshold the SNB will be forced to conduct a balancing act, attempting to quantify the impact of tariffs onto its economy and attempt to salvage and protect growth.
The SNB’s key interest rate is at zero percent, and it is considering whether to cut rates below zero again, a measure it has used in recent years to stimulate inflation and economic activity.
The central bank has not ruled out a return to negative rates, which was the bank’s base case scenario for over 8 years until 2022, but officials noted that below zero interest rates run the risk of placing excessive strain on savers and businesses.
Market expectations suggest that the SNB may keep rates steady well into next year, but signs of slight inflation could delay aggressive easing.
Technical Analysis
USDCHF Chart – The Franc remains stuck near 14-year highs against the dollar
Resistance: 0.8090 (R1), 0.8180 (R2), 0.8320 (R3)
Support: 0.7910 (S1), 0.7810 (S2), 0.7710 (S3)