Switzerland’s Third Interest Rate Cut since March
September 26, 2024
The Swiss National Bank today announced a policy rate reduction of 25 basis points to 1.0% that follows similar-sized cuts in June and March. The SNB only reviews policy on a quarterly basis. At 1.0%, the new policy rate level drops to its lowest level since March 2023. As before, officials used this opportunity to remind market participants that the Swiss franc is overvalued and they stand ready to counteract the currency’s excessive strength with forex intervention as necessary. Unlike other reviews, a particularly dovish tone to accompanying statement suggests that intervention, which in the past has been slight if at all, may be much more forceful in the future.
Together with the lower oil price and electricity price cuts announced for the beginning of 2025, the appreciation of the Swiss franc has contributed significantly to reducing inflationary pressure.
Consequently, projected average Swiss inflation for 2025 was dropped to 0.6% from 1.1% indicated in June’s review, and inflation in 2026 was revised to 0.7% from 1.0%. Officials are bracing for second-order downward pressure on inflation from very depressed price expectations, and in their new forecast, year-on-year inflation is seen being lower than forecast in June for every quarter extending into the first half of 2027 when its is shown to be a mere 0.6%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Swiss National Bank
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