At 0.75 percent, the official three-month target Swiss interest rate remains on the low side for the industrialized world, with only Japan coming in lower. Many analysts believe monetary policy from the Swiss National Bank (SNB) is on hold for now, with its next meeting coming up June 16. The bank last adjusted rates in September 2004 with a 25 basis point rate hike.
The weak interest rate environment ultimately is a negative factor for the currency.
“As long as a steady policy is sustained, a softer franc trend [vs. the dollar] is likely to continue as a reflection of the real economy,” says Kathleen Stephansen, director of global economic research at Credit Suisse First Boston. Some analysts point to fall 2005 as the first likely time for a potential rate hike, with Stephansen forecasting the potential for the Swiss rate to climb to 1.25 percent by year-end.
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