Skip to content Swiss Franc Hits 3-Month Low as Inflation Drops
The Swiss Franc has weakened to around 0.87 against the U.S. dollar, marking its lowest point since mid-August. The main reason for this decline is that Switzerland’s inflation rate unexpectedly dropped to 0.6% in October, its lowest over three years. Low inflation indicates that prices for goods and services in Switzerland aren’t rising much.
SNB Eyes 0.5% Rate Cut in December to Boost Inflation
Because inflation is so low, many expect the Swiss National Bank (SNB) might consider a larger interest rate cut of 0.5% at its meeting in December. Cutting interest rates can encourage people and businesses to spend and invest more, which can help bring inflation back up into the SNB’s target range of 0% to 2%. The SNB wants to prevent inflation from dropping even further below this range.
In September, the SNB already reduced its key interest rate for the third time in a row, lowering it by 0.25% to 1%. They also hinted that more rate cuts could be on the way because the pressure causing prices to rise is decreasing significantly.
Strong U.S. Dollar Pressures Swiss Franc Amid Fed Outlook
Additionally, the Swiss Franc is feeling the impact of a stronger U.S. dollar. The dollar is gaining strength due to the upcoming U.S. presidential election and because people believe the Federal Reserve might slow down its pace of easing monetary policy. This means the Fed may not cut interest rates as quickly or as much as previously thought, making the dollar more attractive to investors.
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