SNB Sees Room for Rate Cuts as Inflation and Growth to Slow in 2009 (Update)
Dailyfx | Dec 23, 2008 07:00PM ET
SNB leaves door open for further cuts in its latest monetary policy report, which repeated and expanded the sentiment expressed after the last rate cut. The central bank sees negative growth of -0.5% to -1.0% next year and expects inflation to fall to 0.9%. The central bank repeated that "the improvement in the inflation outlook has provided room for maneuver which the SNB is decisively using". It added that it will continue to "closely monitor developments in the global economy, in financial markets and in foreign exchange markets" and "will implement further measures should the situation so require". Comments confirm that the SNB is less concerned than the ECB about bringing rates close to zero.
Meanwhile, Swiss Franc (CHF) dipped after the SNB's latest monetary report, which left the door open for further cuts. The Bank sees negative growth next year between 0.5% and 1% and expects inflation to fall to 0.9%. It said it would implement further measures should the situation require, which is in line with market expectations of further rate cuts in early 2009. EUR/CHF is changing hands close to 1.5120, but may struggle to push further ahead amid ongoing appetite for swissy in to the Christmas holidays. EUR/CHF recorded 1.5071 lows just ahead of the SNB release and USD/CHF traded as low as 1.0794 before support came in. Global recessionary concerns and weak European fundamentals encouraged European name selling of sterling and euros for swissy, while USD/CHF has been influenced by one-off year-end order flows. Since the start of the week the weight of CHF demand has overwhelmed any dollar buying momentum.
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