SNB Maintains Accommodative Stance on Rates Amid Firmer Franc

Swiss National Bank (SNB) policymakers have signaled they are more comfortable with a firmer Swiss Franc, but this doesn't necessarily mean they're preparing to raise interest rates. SNB kept its policy rate unchanged at 0% and toned down its FX intervention language in the recent decision. This revised stance has caused some market participants to reassess their expectations for a potential rate hike.

However, strategists at OCBC argue that this subtle shift is not enough to transform the Swiss Franc into an investment currency just yet. They point out that inflation remains within the SNB's 0-2% price stability range and policy rates are expected to remain anchored in the near term. In fact, the central bank forecasts average inflation of just 0.8% in 2027 and 2028 while maintaining its assumption of 0% policy rates throughout the forecast horizon.

OCBC expects rates to remain unchanged well into 2027, whereas OIS markets continue to price a meaningful probability of a rate hike as early as December. While risks to CHF funding persist, particularly from a sharp rebound in gold prices or a material deterioration in the European growth outlook, neither scenario appears imminent at present.