TCMB Hikes Rates to 46%, SNB Cuts, BOE Holds; Turkish Lira and CHF Tumble, GBP Unfazed
Today the SNB cut rates by 0.25%, while the TCMB hiked them to 46%, though both the TRY and CHF tumbled, while the GBP held well, as the BOE left interest rates unchanged.
Both the BOE and SNB maintained cautious tones, with the BOE holding rates steady while keeping the door open for adjustments based on inflation trends. The SNB cut rates but remains prepared to intervene in markets if needed.
Meanwhile, Turkey’s central bank continues to manage volatility through liquidity measures while signaling readiness to tighten policy if inflation worsens. The global monetary landscape remains uncertain, driven by geopolitical tensions, inflation risks, and trade disruptions. Markets will closely watch upcoming economic data for further policy direction.
Bank of England (BOE) March 2025 Monetary Policy Decision
- Bank rate unchanged at 4.50%, as widely expected (previous: 4.50%).
- Rate vote split: 8-1 (Dhingra voted for a 25 bps cut), versus 7-2 expected.
- Disinflation progress acknowledged, allowing for a gradual withdrawal of policy restraint while keeping an overall restrictive stance.
- Global trade policy uncertainty has increased since the last policy meeting.
- Geopolitical risks have intensified, contributing to financial market volatility.
- Business surveys still indicate weak economic growth, reinforcing a cautious approach.
- BOE signals that if inflation pressures subside, a less restrictive monetary policy path may be considered.
- However, second-round inflation effects could justify maintaining tighter policy in the near term.
- BOE emphasizes that monetary policy must stay restrictive for long enough to ensure inflation stabilizes at the 2% target.
BOE and SNB Maintain a Cautious Approach
The Bank of England (BOE) announced its latest rate decision, which was widely expected, and the central message of its statement remained largely unchanged. However, like the Turkish central bank, there are signs that policymakers are becoming slightly less dovish. Inflation concerns persist, and the BOE appears to be weighing risks carefully before committing to any major policy shifts.
GBP/USD Chart Daily – MAs Hold As Support
Meanwhile, the Swiss National Bank (SNB) has also maintained a cautious stance. Although there is no clear signal that the SNB is preparing to loosen policy further, they continue to highlight rising global uncertainty. For now, the SNB still believes that inflation will remain under control throughout 2025. With the key policy rate at 0.25%, they are likely hesitant to move toward a zero or negative interest rate environment too soon, opting instead to preserve monetary policy tools for future uncertainties.
Swiss National Bank (SNB) First Policy Decision of 2025
- SNB cuts key policy rate by 25 bps to 0.25%, in line with expectations (previous: 0.50%).
- Prepared to intervene in the FX market if necessary to manage currency fluctuations.
- Ensuring that monetary conditions remain appropriate, given low inflation risks and downside economic risks.
- Inflation has been developing in line with expectations, and the global economy is expected to grow moderately in the coming quarters.
- Underlying inflation pressures are expected to ease gradually over the next few quarters.
- Economic outlook remains uncertain, particularly due to trade tensions and geopolitical risks.
- GDP Projections:
- 2025: 1.0% – 1.5% (unchanged).
- 2026: 1.5% growth expected.
- Inflation Projections:
- 2025: 0.4% (previously 1.1%).
- 2026: 0.8% (previously 0.3%).
- 2027: 0.8% (unchanged).
Swiss Franc Weakens as USD/CHF Rises
Since yesterday, USD/CHF has been climbing, pushing the Swiss Franc lower and breaching the 0.88 level. This movement comes after traders had priced in only a 68% chance of an SNB rate cut before the official decision. As a result, the market reaction suggests that some investors were caught off guard, leading to a selloff in the Franc.
With central banks around the world taking different approaches to monetary policy, volatility in currency markets remains high. The Turkish Lira continues to struggle despite aggressive rate hikes, while the BOE and SNB are taking a more measured approach, closely watching inflation trends before making their next moves.
Turkish Central Bank Announcements
- Introduced FX liquidity measures to limit market volatility.
- Prepared to tighten monetary policy if inflation outlook deteriorates significantly and persistently.
Turkey’s Central Bank Raises Rates, But Lira Continues to Slide
The Turkish Lira (TRY) has lost approximately 85% of its value since 2020, prompting Turkey’s central bank to raise the overnight lending rate from 45% to 46%. Typically, such a rate hike would be expected to strengthen the currency, but instead, USD/TRY continued its upward momentum, surging to 41. Despite higher rates, confidence in the Lira remains weak, suggesting that investors are still wary of Turkey’s economic stability.
While the central bank’s statement maintained similar language as previous decisions, there is a subtle shift toward a less dovish stance. This is particularly noticeable in discussions regarding inflation risks and future policy direction. However, with rates now at 46%, questions remain about how much further Turkey can push monetary tightening without severely impacting economic growth.
USD/CHF Live Chart
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