ING expects the Swiss National Bank to keep its policy rate at 0% next Thursday and to leave it unchanged over the coming quarters. The view rests on a combination of firmer activity and muted price pressures, with Switzerland\u2019s domestic inflation described as benign and the Swiss franc still strong, even after a slight recent weakening. ING also expects global energy prices to decline over time, which would further limit any need for tighter policy.<\/p>\n\n
The bank has lifted its Swiss growth projections, putting average GDP growth at 1.9% in 2026 and 1.6% in 2027, citing a solid first half, more supportive international demand and the marginally softer currency. It expects the SNB to continue to diverge from other central banks by maintaining a more accommodative stance, while retaining a targeted approach to foreign exchange intervention as long as inflation stays subdued and the franc does not appreciate excessively.<\/p>\n\n
With the Swiss National Bank meeting on September 24, we expect policymakers to hold the key interest rate steady at 0%. This decision is backed by Switzerland’s remarkably low consumer inflation, which sat at just 1.1% in August. Because of this benign pricing environment, the central bank has plenty of room to maintain its highly accommodative stance.<\/p>\n\n
For derivative traders, this rate freeze makes the Swiss Franc an ideal funding currency for carry trades. We suggest shorting the Franc against higher-yielding currencies like the US Dollar, where interest rates remain significantly higher. This strategy allows us to capture the wide interest rate differential while Swiss economic growth continues its steady 1.9% climb.<\/p>\n\n
With Swiss inflation firmly under control and no sudden policy shifts on the horizon, currency volatility is likely to compress. We recommend selling out-of-the-money options on the EUR\/CHF pair to collect premium. Using strategies like short strangles or iron condors can help us profit from a highly stable exchange rate, which has recently hovered around the 0.94 level.<\/p>\n\n
We should also look at the forward markets to lock in cheap Swiss Franc funding rates for long-term positions. Since the central bank is highly unlikely to hike rates over the coming quarters, long-dated CHF put options offer cheap protection against any unexpected currency spikes. This setup gives us a low-cost way to position for a stable or slightly weaker Franc in the coming weeks.<\/p>\n\n\n\n