Inflation Acceleration Increases Pressure on SNB for Rate Hike
Swiss consumer prices came in higher than forecast, boosted by rising oil prices. The Federal Statistic Office said that consumer prices rose 0.5% from a year earlier after increasing 0.3% in January, a faster acceleration than the 0.4% forecast. While there may be little need at present for the central bank to act inflationary pressures are expected to grow in coming months with expectations centered on a rate hike in the June to August period. This speculation has been reinforced by recent comments by SNB Vice-President Jordan who said that he sees a need to fight inflation risks over the medium to longer term.
The Swiss franc immediately strengthened as rate hike expectations boost the currency and the market takes a more optimistic view of the Swiss economy which was threatened by deflation last year. On the day Usd/Chf is trading around flat, at present, as a bout of US dollar strength keeps franc gains in check. However, if rate hike speculation begins to dominate this market as we have seen it do recently in Cable and Eur/Usd a move back to record lows, at 0.9200, and below could be on the horizon.
Written by Jonathan Granby, DailyFX Research Team
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