The Swiss National Bank (SNB) decided to keep interest rates at 0%. Chairman Martin Schlegel shared insights on economic forecasts and inflation. The SNB will keep an eye on the economy and is ready to change monetary policy if necessary to maintain price stability. Even with low interest rates, inflation pressure for the midterm remains the same as before. Schlegel highlighted that the SNB is prepared to step in if the currency market needs it. The central bank’s goal is to encourage inflation in the coming quarters. They will continue to support economic growth as uncertainty has eased somewhat. Global economic growth is expected to be moderate, though there are still risks like US tariffs. He indicated that unemployment rates may rise slightly before falling again. The interest rate strategy has worked well after initial cuts. Following their announcement, USD/CHF began to strengthen. As Switzerland’s central bank, the SNB is focused on price stability and can act in the forex market to prevent the Swiss Franc from getting too strong, which helps protect exports. The SNB meets every quarter in March, June, September, and December to review its monetary policy. The Swiss National Bank clearly stated that it will keep an accommodative monetary policy to support growth and gradually raise inflation. This strengthens the idea that the SNB will actively oppose any significant rise in the Swiss franc. Therefore, we anticipate a bearish trend for the CHF in the upcoming weeks. Their reasoning is clear since the November CPI showed only 0.8% inflation year-over-year, which is much lower than the 2% target. Low inflation, combined with a modest Q3 GDP growth of 0.3%, justifies the bank’s continued dovish stance. We see little reason for change before their next meeting in March 2026. One simple strategy could be to buy call options on USD/CHF. This allows us to benefit from a weaker franc while keeping potential losses limited to the premium we pay. It’s a smart way to position for potential gains, especially with the SNB’s clear intent to intervene in the currency market if needed. The interest rate difference offers another opportunity. With the US Federal Reserve maintaining its key rate between 3.00% and 3.25%, using the franc as a funding currency for a carry trade is appealing. Borrowing at close to 0% in Switzerland to invest in higher-yielding US assets could yield consistent returns. We also need to remember the SNB’s ability to take decisive actions. The market chaos in January 2015, when the bank unexpectedly removed the EUR/CHF peg, is still fresh in our minds. This history adds credibility to their current commitment to intervene against CHF strength.

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