Monetary Policy

The Swiss National Bank (SNB) left its target LIBOR rate unchanged at 0.75 percent at its mid September meeting.

Most analysts expect the SNB to hold steady at its December meeting, though there is risk of a modest 0.25 percent rate hike if economic conditions continue to improve. Others believe the SNB will wait until March 2006 to nudge short-term rates higher.

However, over the near term, any shift in monetary policy is not expected to be a major market mover in the forex arena.

“The markets have already priced in a rate hike. It’s not a big deal,” says Tom Rogers, senior currency analyst at Thomson Financial.

Rogers said the odds are 60-40 that the SNB would wait until March to pull the trigger on a rate hike.

“If the economy stagnates or struggles, they will wait until March,” he says. “The question is will it be the start of a longer term trend toward higher rates.”

Over the next year or so some market watchers already see potential for more rate hikes down the road.

“The economy is picking up. We are expecting growth to accelerate,” says Jim Glassman, senior economist at JP Morgan Chase. He feels that a .25-basis point hike could occur by year-end, with a move toward a 1.75-percent target rate over the next 12 months.