European banks at a crossroads: behind the BoE and SNB's no-raise decision
The Bank of England and Swiss National Bank both kept interest rates unchanged against expected hikes. Find out why both banks paused and how GBP/USD and USD/CHF were affected.
Bank of England holds policy interest rate at 5.25%
Markets anticipated a 25 basis point rate hike from the BoE prior to this morning’s meeting, causing surprise when a hold at 5.25% was announced. This hold marks the first pause in rate hikes in almost two years – hiking at each of the previous 14 meetings.
Much like the ECB last week, the Bank of England is facing both high inflation and a slowdown in economic growth. Ultimately, yesterday’s release of lower-than-expected inflation data from the UK supported the decision to hold rates steady – fearing another hike would do more damage to economic conditions than lower inflation.
GBP/USD sunk lower on the news, dipping below 1.2300 for the first time since April 3rd.
GBP/USD daily price history
Swiss National Bank holds policy rate at 1.75%
Switzerland also surprised markets early this morning by forgoing a 25 bps increase in favor of a hold at 1.75%. The Swiss find themselves in better standing than many of their neighboring countries with inflation currently under their 2% goal. While the SNB announced further monetary tightening is still possible, a sixth consecutive hike was not deemed necessary at the current time.
USD/CHF jumped over 60 pips in the hour following the announcement, crossing 0.9000 for the first time since June. In the hours since, the pair has given up some of those gains but still trends higher on the day.
USD/CHF hourly price history
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