empty
03.06.2022 08:54 AM
Franc on the rise: high inflation could 'wake up' Swiss hawks

This image is no longer relevant

The last stronghold has fallen. In Switzerland, which until then had steadfastly held out amid a total rise in prices, inflation in May reached its highest level in 14 years. Will this force the Swiss National Bank (SNB) to raise rates?

The increase in fuel and food prices due to the situation in Ukraine has provoked a sharp surge in prices on all continents this year.Until recently, Switzerland remained an island of stability in this global chaos. But it seems that it, too, has finally begun to feel high inflationary pressures.

On Thursday, the country's government announced that the annual inflation rate in Switzerland rose to the highest level since September 2008.

Compared to last month, the consumer price index jumped from 2.5% to 2.9% on an annualized basis.

May was the fourth consecutive month when inflation in the country rose above the target of the SNB. Recall that the central bank aims for an annual inflation rate of 0-2%.

However, the price increase that has been going on since February has already gone too far beyond this range. Does this mean that the SNB may change its monetary policy in the direction of tightening in the near future?

Of course, compared with the high inflation rates in the eurozone or the UK, the rise in prices in Switzerland does not look catastrophic.

However, if we take into account the fact that the country has a traditionally low level of inflation, we can assume that even such a relatively small value is already critical for it.

Analysts predict that soon high prices will begin to put pressure on the Swiss economy and the SNB will have no choice but to start fighting rising inflation by raising rates.

Currently, the central bank adheres to an adaptive policy, which implies a base rate of -0.75%. This is the lowest indicator among all major banks.

So far, the SNB shows no signs of tightening policy. Moreover, it did not comment on inflation data released yesterday.

According to the forecasts of the Swiss bank UBS, the central bank will not rush to raise rates until September. Most likely, the SNB will want to assess the consequences of the beginning of the tightening of European Central Bank policy, which is scheduled for July.

However, investors' concerns about an earlier SNB rate hike are growing.

At the end of May, Andrea Mehler, a member of the governing board of the Swiss National Bank, said that the central bank would not hesitate to raise the rate if inflation remains persistently high.

Yesterday's release of the CPI strengthened the hawkish sentiment of the market, which had a positive impact on the franc.The Swiss currency gained 0.5% against the dollar on Thursday. At the end of the day, the USD/CHF was trading at 0.9596.

This image is no longer relevant

Now the "Swiss" is retreating further and further from the dangerous mark of 1.0020, which it touched in mid-May and thereby ensured parity for the dollar.

The rise of the franc is also taking place amid the general weakness of the US currency. Yesterday, the greenback index fell across the board as investors returned to risk.

The lifting of the quarantine in Shanghai and the potential increase in oil production in Saudi Arabia led to the growth of global stock markets.

As a result, the dollar index, which tracks the dollar against six major currencies, broke a 2-day climb and fell 0.8% to 101.78.

Further dynamics of the USD/CHF pair depends on the medium-term inflation forecasts of the SNB.

Also, investors are looking forward to the central bank's next meeting on monetary policy, which is scheduled for June 16.

Аlena Ivannitskaya,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

US Market News Digest for March 14

Yesterday, the S&P 500 index hit the target level of 5,516 – the same level as June 20, 2024, which is the 23.6% Fibonacci retracement of the entire rally from

Natalia Andreeva 10:34 2025-03-14 UTC+2

Gold hits record high at nearly $3,000 an ounce. Why are investors dumping stocks en masse?

Wall Street indexes down 1%, S&P 500 confirms correction Trump's tariff changes affect sentiment Gold hits all-time high at $2,993.80 an ounce The US dollar fell against

Thomas Frank 09:40 2025-03-14 UTC+2

Clash of corporate giants: Intel stock soars, PepsiCo loses ground

Intel shares jumped following news that TSMC has extended a joint venture to American chip manufacturers. PepsiCo, on the other hand, fell due to a brokerage downgrade. The latest

10:42 2025-03-13 UTC+2

US Market News Digest for March 13

Intel shares saw an uptick following news of a proposal by TSMC to support US chip manufacturers. This development bolstered investor confidence in the semiconductor sector. Meanwhile, PepsiCo shares came

Ekaterina Kiseleva 10:09 2025-03-13 UTC+2

Intel Stocks Soar, PepsiCo Loses Support: Who Will Win the Race?

Intel Jumps After TSMC Unveils JV with U.S. Chipmakers PepsiCo Slips After Broker Downgrade CPI Shows February Inflation Slowed More Than Expected Indices: Dow Down 0.20%, S&P 500 Up 0.49%

Thomas Frank 05:43 2025-03-13 UTC+2

US Market News Digest for March 12

The S&P 500 is trading lower, but it could reverse upward: oscillators signal a turnaround Trade wars escalate: Trump imposes new tariffs, markets respond with losses. The S&P

Irina Maksimova 10:48 2025-03-12 UTC+2

Business vs. Trump: Companies Lose Billions Due to Tariff Policy

The Number of Vacancies in the US Increased to 7.74 Million in January Kohl's Falls Due to Dismal Annual Sales Forecast Airlines Put Pressure on Dow Transports Trump Maintains Tariff

Thomas Frank 10:42 2025-03-12 UTC+2

US Market News Digest for March 11

After a sharp sell-off on Wall Street that sent the Nasdaq 100 into its deepest plunge since 2022, markets are beginning to recover. Futures on the S&P 500 rose

Natalia Andreeva 11:07 2025-03-11 UTC+2

Tesla Loses $125 Billion, Nasdaq Falls 4% as Economic Uncertainty Rises

Crypto Stocks Fall on Low Bitcoin Prices HSBC Downgrades US Stocks S&P 500 Closes Below 200-Day Moving Average Nasdaq Suffering Biggest One-Day Drop Since September 2022 Delta Air Lines Cuts

Thomas Frank 10:34 2025-03-11 UTC+2

US Market News Digest for March 10

US stock futures fell as investors turned to safe-haven assets amid growing concerns over a slowing US economy and trade risks. The Japanese yen strengthened by 0.6%, reaching 147.245

Irina Maksimova 11:37 2025-03-10 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.