SNB Decision Sends Swiss Franc Reeling Past $0.82
The Swiss National Bank (SNB) kept its key interest rate at 0% in September, citing elevated uncertainty in the Middle East and higher oil prices. The decision had an immediate impact on the Swiss franc, causing it to weaken past $0.82 per USD for the first time since May 2025.
This weakening of the franc is a double-edged sword. On one hand, a weaker currency can boost exports by making them cheaper for foreigners. However, it also increases the cost of imports and medium-term inflationary pressures. The SNB has repeatedly expressed its preference for intervening in foreign exchange markets to curb excessive appreciation.
The SNB's decision contrasts with other central banks, which have been raising interest rates to combat inflation. As a result, the widening interest rate differential between Switzerland and the US could make the franc more attractive as a carry-trade funding currency. This shift towards currencies with exchange-rate stability and low borrowing costs puts downward pressure on the Swiss franc.