Swiss franc soars after unexpected SNB rate hike
The Swiss franc soars against its major counterparts after the Swiss National Bank’s (SNB) relatively unexpected rate hike on Thursday. The central bank decided to raise rates by 50 basis points to -0.25% amid significant inflationary pressures, with inflation hitting 2.9% in May and expected to peak at around 3% in the coming months before falling back below 2% during the year 2023, according to the institution’s latest forecasts.
The SNB’s decision was relatively unexpected in terms of timing and magnitude, as evidenced by the Swiss franc’s jump of more than 2% against the euro on Thursday. Traders expected the central bank to raise rates for the first time by just 25 basis points and after the summer.
EUR/CHF could therefore continue to fall and come back to test the euro-franc parity in the coming weeks, the SNB’s decision paving the way for much faster monetary tightening than traders expected. The next rate hike by the SNB could come at the next central bank meeting in September, if inflation surprises on the upside.