The GBP/CHF currency pair settled below recent high of 1.0601, its strongest level since February 5th, in the wake of the Bank of England’s and the Swiss National Bank’s policy decisions.
The Bank of England left its key rate unchanged at 3.75% at its March meeting, as all nine members of the Monetary Policy Committee voted for a hold, surprising market participants.
The decision is viewed as slightly hawkish, as some investors had expected hints of a rate cut. Rate hike expectations for this year have risen following the announcement.
Inflation projections show potential growth to around 3% in Q2 and up to 3.5% in Q3, well above the 2% target. Rising energy costs and Middle East tensions are key drivers.
The BoE also indicated a pause in the easing cycle, preferring to monitor the energy shock before making policy adjustments. Governor Andrew Bailey noted that spare economic capacity could help contain inflation.
At the same time, the Swiss National Bank left its policy rate unchanged at 0% at its March meeting, as widely expected by markets.
Low inflation has given policy makers room to stay cautious. Consumer prices rose 0.1% year-on-year in February, showing limited pressure.
The SNB’s latest projections point to very weak inflation through 2027. This suggests that policy makers see little need for tighter policy.
Because of this outlook, expectations for rate hikes remain low. The central bank appears comfortable maintaining current settings.
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