Swiss Franc Hits 2-Month Low Amid Low Inflation
Solid ECN - The Swiss franc fell below 0.88 against the US dollar in February, hitting its lowest point in over two months, following an unexpectedly low inflation report. This report supported those in the Swiss National Bank who favor less aggressive monetary policy. In January, Switzerland's consumer price index increased by 1.3% compared to the previous year, missing the expected increase of 1.7% and marking the lowest rise over two years.
This was also the seventh month in a row that inflation stayed under the SNB's preferred maximum of 2%. The drop in inflation came even as there were expectations for higher figures amidst the country's gradual removal of electricity subsidies and adjustments to the value-added tax system. This led to increased speculation that the SNB might reduce its key interest rate sometime in the year's first half, possibly as early as March. Additionally, the franc's value was further lowered as the SNB grew its foreign exchange reserves in January for the second consecutive month, signaling a recovery from a continuous decrease over the last two years, bringing the reserves to their lowest in seven years.