SNB and Riksbank Keep Interest Rates Unchanged Amid Weakening Franc

The Swiss National Bank (SNB) and Sweden's Riksbank made their interest rate decisions, leaving markets largely unchanged. The SNB kept its policy rate at 0% for a fifth consecutive quarter, while the Riksbank maintained rates at 1.75%. The SNB's statement was cautious and slightly dovish, acknowledging potential inflationary pressures from a weaker franc.

The SNB removed language about an 'increased willingness' to sell the franc, suggesting a lower propensity for intervention in the FX market. However, despite this, the franc weakened against both the euro and US dollar, increasing import costs and potentially adding to inflation. The Riksbank signaled a possible rate hike later this year if inflation stabilizes around 2% and the economy continues to recover.

The SNB's decision may lay groundwork for future rate hikes, although most economists do not expect one before 2028. An alternative to rate hikes could be FX-market action, such as selling foreign assets to strengthen the franc and limit imported inflation. The Riksbank's move fits into the broader trend of tighter monetary policy following recent moves by both the ECB and the Fed.