The Swiss National Bank did not dare to openly break the CHF growth trend

The Swiss National Bank kept its key rate at 0.0% after lowering it to this level in June. At the same time, the Bank noted it remains “willing to be active in the foreign exchange market as necessary”.

Switzerland pointed to inflation close to previous forecasts and within the range of price stability, with forecasts of +0.2% in 2025, +0.5% in 2026, and +0.7% in 2027, provided that the key rate remains at the current level of 0.0%.

Economic forecasts remain uncertain due to US tariffs. As a rule, policymakers use this phrase to signal expectations of weak growth and the presence of downside risks. Forecasts for this year range from 1% to 1.5%, and next year, GDP is expected to grow by less than 1% with a likely increase in unemployment. This year's figures were supported by importers' desire to purchase Swiss goods before the tariffs were raised. Now we are seeing the opposite trend and expect the negative effect to intensify next year.

The dynamics of changes in foreign exchange reserves show that the SNB has been selling francs and buying foreign currency since the end of 2023. All this time, EURCHF has not fallen below 0.9200. At the same time, since 2021, the pair has been forming a sequence of lower local highs, indicating growing pressure from franc buyers. This resistance line is now near 0.95, compared to 0.9650 at the beginning of the year, 0.9950 in May 2024, and 1.11 at the beginning of 2021.

In our view, lowering the key rate is a more effective step to accelerate the economy and maintain export competitiveness than constant interventions near a certain level. The looming and expected economic slowdown, coupled with the absence of any threat of excessive inflation on the horizon, provides an opportunity to lower interest rates, which the SNB is in no hurry to take advantage of.

Since the start of the day, the franc has lost about 0.3% against the euro and the dollar, but it needs to rise by more than 1% before the bulls in EURCHF and USDCHF start testing the long-term downward resistance line. This move is achievable even without major news, but further gains could signal a meaningful breakthrough.