USD/CHF climbs as the US Dollar remains strong after the Fed keeps rates unchanged

USD/CHF Rises as US Dollar Strengthens

On Wednesday, the Swiss Franc (CHF) weakened against the US Dollar (USD), allowing USD/CHF to recover from a two-day decline. The US Dollar gained momentum, supporting the currency pair. Investors showed little response to the Federal Reserve’s latest policy update, which kept interest rates steady as anticipated.

Currently, USD/CHF is trading near 0.7908, marking an increase of about 0.78% for the day. The US Dollar Index (DXY), which measures the Dollar against six major currencies, stands at approximately 99.85, up 0.30% on the session.

Federal Reserve Policy Decisions

The Federal Reserve voted 11-1 to keep its key interest rate within the 3.50%-3.75% range. Governor Stephen Miran was the sole dissenter, advocating for a 25 basis point reduction.

Officials observed that economic growth remains robust, but inflation is still somewhat high. Job creation has slowed, and unemployment figures have remained stable in recent months.

The Federal Open Market Committee (FOMC) pointed out ongoing uncertainty in the economic outlook, especially due to events in the Middle East. They emphasized that future policy moves will be guided by new data and shifting risk factors.

Economic Projections and Inflation

The Fed’s updated Summary of Economic Projections (SEP) indicated a slight improvement in growth expectations compared to December, with Gross Domestic Product (GDP) forecast at 2.4% for 2026, up from 2.3%.

However, inflation estimates were raised, with Personal Consumption Expenditure (PCE) inflation now expected at 2.7%, higher than the previous 2.4%. The unemployment rate projection for 2026 remains largely unchanged at 4.4%.

The median dot plot continues to anticipate one rate cut in 2026 and another in 2027, projecting the federal funds rate at 3.4% and 3.1%, respectively.

Comments from Fed Chair Powell

During the post-meeting press conference, Fed Chair Jerome Powell noted, “Near-term inflation expectations have risen recently due to developments in the Middle East.” He also remarked, “It is too early to determine the extent and duration of energy market impacts on the economy,” and stressed, “If inflation does not improve, rate cuts will not happen.”

Swiss Economic Outlook

In Switzerland, the State Secretariat for Economic Affairs (SECO) slightly lowered its growth forecast, now predicting the economy will expand by 1.0% in 2026, down from the previous estimate of 1.1%, signaling below-average growth.

This adjustment comes as higher energy costs, driven by Middle East tensions, contribute to increased inflation. Inflation is now projected at 0.4% for 2026, up from the earlier estimate of 0.2%.