The Swiss National Bank decided to keep the countrys main interest rate at its 6-year highest value facing the risks of both a higher inflation rate and a slower economic growth.
The Swiss franc fell today against the U.S. dollar in the Forex market as 3-month LIBOR target rate was left unchanged at 2.75 percent. It was an expected decision, but some analysts forecasted a possible 0.25 percent increase. The interest rate in Switzerland doesnt change since September 2007.
Central banks across the world are facing a new dilemma — to raise the rates and get a lower inflation, or to increase them and prevent growth stagnation. European banks prefer to follow none of these ways and keep the rates unchanged (Bank of England, European Central Bank and now Swiss National Bank), American banks decide in the favor of growth (Federal Reserve, Bank of Canada), meanwhile Asian banks prefer to go up with the rates to fight the inflation (Reserve Bank of India, Central Bank of Philippines, Bank Indonesia).
Some market strategists stand on a position that a wage-based inflation is less likely to spiral in Switzerland than in the Eurozone countries. This factor may keep SNB from raising the rate in future and will decrease francs attractiveness in the medium-term period.
USD/CHF rose today after two days of decline when the dollar has been weak in the Forex market. The currency pair increased from 1.0364 to 1.0424 as of 8:57 GMT today. Before the rate decision it has reached a daily low at 1.0319.
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