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Strong franc opens door to FX purchases and rate cuts

Recent safe haven flows into the franc may have prompted limited FX interventions by the SNB. But we think that the policy rate will remain its main policy tool, even for dampening the franc’s strength. Indeed, we now expect the SNB to cut its policy rate in September from 1.25% to 1.0% where it will remain. If the policy rate falls much further than that, FX interventions will become more prominent again.

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