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Investing.com -- The EUR/CHF strengthened on Thursday after the Swiss National Bank (SNB) reduced interest rates by 25 basis points to 0% and signaled it does not plan additional cuts.
Most market participants had anticipated the rate reduction, though some had expected rates might return to negative territory at -0.25%.
In its announcement, the SNB stated that its inflation forecasts were lower in the short-term while medium-term projections remained largely unchanged.
The central bank noted these projections assume the interest rate will stay at 0% throughout the entire forecast period.
This marked the central bank’s sixth consecutive rate reduction since it began easing borrowing costs in March 2024.
"Inflationary pressure has decreased compared to the previous quarter. With today’s easing of monetary policy, the SNB is countering the lower inflationary pressure," according to the central bank.
According to ING analysts, the Swiss franc is expected to maintain its strength in the coming months due to ongoing trade tensions and geopolitical issues.
The SNB is hoping that widening interest rate differentials between Switzerland and other central banks will help limit the franc’s appreciation.
However, the currency’s status as a "safe haven" continues to attract capital flows during periods of high risk, which should keep the franc strong despite the SNB’s efforts, ING said in a note.
Analysts suggest that significant weakening of the Swiss franc remains unlikely in the current troubled global environment.