Swiss Franc: Hot inflation and SNB path – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad reports the Swiss Franc (CHF) is the second-best performer today after the Japanese Yen as Swiss inflation surprised to the upside in August, reinforcing Swiss National Bank (SNB) hike expectations. Despite this, markets still fully price a first 25 bps hike only in June 2027, and Haddad notes current low rates and contained inflation remain a headwind for the Franc over the quarter.

Swiss inflation and Franc performance

"CHF is today’s second best performing major currency, behind JPY. Swiss inflation ran hot in August reinforcing SNB rate hike expectations."

"Headline CPI rose more than expected to 0.8% y/y (consensus: 0.5% y/y) vs. 0.4% in July. Headline inflation is the highest since September 2024 and above the SNB’s Q3 forecast of 0.6% y/y. Core CPI inflation also surprised to the upside at 0.4% y/y (consensus: 0.3%), following four straight 0.3% readings."

"That’s an ongoing headwind for CHF. CHF is the worst performing G10 currency so far this quarter."

"The swaps curve continues to fully price in a first 25bps hike to 0.25% in June 2027. The SNB has plenty of room to keep rates at 0.00% for some time, given that inflation remains well within the bank’s price stability mandate of less than 2% per annum. "