The Swiss National Bank slowed the pace of its tightening cycle on Thursday, in line with market expectations but signaled there is more to come.
While most central banks would dream of 2.2% inflation right now, the SNB has made clear that there will be no complacency. Today's hike likely doesn't mark the end of its cycle, with another 25 basis points expected in September.
Having previously indicated that he believes the neutral rate is around 2%, Chair Thomas Jordan has effectively signaled to the markets that they won't be done until at least this level is reached and today's comments support that.
As did the forecasts, which assuming steady rates, had inflation remaining above 2% in two years' time. In other words, more tightening will be necessary, alongside currency interventions, in order to get inflation back below 2%.
Despite some initial volatility, the Swiss franc is only a little lower on the day and not far from its pre-release levels. Against the Dollar, it has been trending sideways for more than a month and today's decision has so far failed to sway it one way or another.
A move below 0.8850 could make things interesting, as could a move above 0.91, but with the price sitting almost in the middle of these two levels currently, we may have to wait a little longer yet.
Markets are pricing in a strong chance of another hike in the cycle while indicating a small chance that the central bank is done. There is still a long way to go in the global inflation fight and, if the last couple of years are anything to go by, there may be some more twists and turns to come.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0500, looks to post weekly losses
EUR/USD extended its daily decline toward 1.0500 in the second half of the American session, pressured by the souring market mood. Despite the bullish action seen earlier in the week, the pair remains on track to register weekly losses.
GBP/USD falls below 1.2150 as USD rebounds
Following an earlier recovery attempt, GBP/USD turned south and declined below 1.2100 in the second half of the day on Friday. The negative shift seen in risk mood amid rising geopolitical tensions helps the US Dollar outperform its rivals and hurts the pair.
Gold advances to fresh multi-week highs above $1,920
Gold extended its daily rally and climbed above $1,920 for the first time in over two weeks on Friday. Escalating geopolitical tensions ahead of the weekend weigh on T-bond yields and provide a boost to XAU/USD, which remains on track to gain nearly 5% this week.
Bitcoin could be an alternative to US-listed companies but not in the short term
Bitcoin has dipped below $27,000, adding to the subdued cryptocurrency market sentiment. While short-term price concerns persist, analysts predict a rebound based on historical figures.
Nvidia Stock Forecast: NVDA slips as Biden administration attempts to close AI chip loophole
Nvida's stock price opened marginally lower on Friday after Reuters reported that the Biden administration is attempting to close a loophole that allowed Chinese companies access to state-of-the-art computer chips used for AI.