CHF softens after SNB holds rates - BBH

The Swiss Franc (CHF) underperformed after the SNB kept its policy rate at 0%, but persistent safe-haven demand offsets concerns over a potential negative rate, while the central bank downgraded 2026 GDP growth due to elevated US tariffs, BBH FX analysts report.

GDP outlook downgraded amid US tariffs

"CHF underperformed after the Swiss National Bank (SNB) left the policy rate at 0%, as expected. The SNB signaled that the bar for negative rates is high but cannot be ruled out. In fact, SNB President Martin Schlegel reiterated that the bank is prepared to cut further if required."

"Otherwise, the SNB's medium-term inflation forecast remains unchanged and within the range of price stability. The SNB downgraded its 2026 GDP growth projection to "just under 1%" from for 1% to 1.5% previously due to significantly higher US tariffs. Therefore, any settlement of the trade dispute with the US would lower the risk of the SNB resorting to a negative policy rate."

"The swaps market continues to imply nearly 50% odds of a 25bps SNB rate cut to a low of -0.25% in the next 12 months. Regardless, CHF safe haven status more than outweighs the drag to the currency from the likelihood of negative rates."