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SNB Holds Rates, Drops 'Increased Willingness' to Intervene as Franc Weakens
The Swiss National Bank left policy unchanged and softened its currency language, a shift one strategist links to the franc's recent weakness rather than any reluctance to intervene again.
By PREVICT Research
Key points
- The SNB left rates unchanged and struck a dovish tone, signaling no concern about second-round inflation effects despite an upward revision to its inflation projections.
- The central bank removed the phrase "increased willingness" from its intervention language but retained its commitment to act when necessary.
- ING's view is that market pricing remains too hawkish, with a hike fully priced by March, and sees downside risks for the franc including EUR/CHF potentially retesting 0.9480.
The Swiss National Bank held interest rates unchanged as expected, but signaled a more dovish policy stance and adjusted its currency language, dropping a reference to an "increased willingness" to intervene in foreign exchange markets while keeping its commitment to act when necessary.
The decision came despite the SNB revising its inflation projections higher. Policymakers indicated they see no signs of second-round effects, treating the price shock as temporary — a judgment that underpins the dovish tilt in the statement.
The tweak to the currency stance drew the most attention. The SNB removed the reference to an "increased willingness" to intervene, though it retained its commitment to act when necessary. ING characterized the change as an adjustment reflecting the franc's recent weakness rather than a signal of reluctance to intervene again should the currency appreciate.
Rate expectations remain a point of tension. A hike is already fully priced in by March, but ING said it sees few reasons for the SNB to tighten policy in the foreseeable future, arguing market pricing is too hawkish. The strategist sees downside risks for the franc, with EUR/CHF potentially retesting the 0.9480 highs seen earlier in September, and flagged USD/CHF as offering even greater upside potential — an October Federal Reserve hike could prompt a rally to 0.85 in the near term.
