Swiss Franc retreats further as SNB vice chairman hints at lower-for-longer rates

The Swiss Franc (CHF) continued to weaken on Thursday, marking its fourth consecutive day of decline against the US Dollar (USD). The USD/CHF pair surged closer to weekly highs near 0.8350, nearing 17-month highs near 0.8380. SNB Vice Chairman Antoine Martin expressed no immediate changes to the bank's monetary policy, despite elevated risks from the Iran war.

Martin emphasized the uncertainty surrounding the economic outlook, but ruled out imminent interest rate hikes, stating that the bank remains within the price stability range of 0% to 2%. This position creates a monetary policy divergence between the SNB and the US Federal Reserve, which anticipates hikes of at least 50 basis points over the next six months.

The Federal Open Market Committee's minutes from their September meeting did not change the outlook for further rate increases in October. However, the bank warned about inflation risks, reinforcing expectations of another rate hike in December. Analyst Lloyd Chan from MUFG/BTMU cautioned that if long-term yields climb further, market focus may shift to broader tightening in US financial conditions and potential concern over Treasury market conditions.

The SNB, Switzerland's central bank, is tasked with maintaining price stability over the medium and long term, aiming for a Consumer Price Index (CPI) increase of less than 2% annually. The bank adjusts monetary conditions through interest rates and exchange rates. Price stability for the SNB is measured by a CPI rise of less than 2% per year.

The SNB conducts monetary policy assessments quarterly, resulting in policy decisions and medium-term inflation forecasts.