A view of the headquarters of the Swiss National Bank (SNB), before a press conference in Zurich, Switzerland, March 21, 2024.
Dennis Balibus | Reuters
The Swiss National Bank on Thursday cut its key interest rate by 25 basis points to 1.25%, continuing the cuts at a time when sentiment on easing monetary policy remains mixed among major economies.
Two-thirds of economists polled by Reuters expected the Swiss Central Bank to cut interest rates by 25 basis points to 1.25%.
The Swiss franc fell following this announcement Euro rises 0.3% And the The US dollar rises 0.5% Against the Swiss currency at 8:55 am London time.
Following Thursday's decision, the SNB pegged its conditional inflation forecasts at 1.3% for 2024, 1.1% for 2025, and 1.0% for 2026. The figures assume a SNB interest rate of 1.25% over the forecast period.
The country's inflation rate stabilized at 1.4% in May after rising in April, and is expected to reach the same level during all of 2024, according to the Swiss Central Bank's latest forecasts.
The Swiss bank said it now expects economic growth of about 1% this year and about 1.5% in 2025, anticipating slight increases in unemployment and slight decreases in utilization of production capacity.
“In the medium term, economic activity should gradually improve, supported by somewhat stronger demand from abroad,” the Swiss central bank said.
In a June 14 note, analysts at Nomura described the potential cut as a “finely balanced decision” and noted that “underlying inflation momentum remains weak which is likely to increase the SNB’s confidence that inflation will converge to its midpoint.” . Inflation target.
Switzerland already has the second lowest interest rate among the G10 democracies by a wide margin, after Japan. It became the first major economy to cut interest rates in late March, with the European Central Bank following suit earlier this month, and questions are now growing over whether it will continue to cut rates for a third time this year.
Kyle Chapman, FX analyst at Ballinger Group, said the SNB's inflation forecasts “suggest there are still some caps to unwind this year, and to me, that's a strong signal that another rate cut is coming in the coming year.” September”. “I expect the SNB to follow through with a third cut next quarter, and there is a possibility of a fourth cut in December if there is still high conviction in the restrictive level of monetary policy.”
He pointed out that these expectations leave the Swiss franc in a “weak position.”
A Capital Economics analysis note issued on Thursday disagreed, saying the SNB was unlikely to proceed with further cuts this year given the current inflationary landscape.
“Looking ahead, we believe the SNB will not cut interest rates again this year because we are no longer confident that underlying inflationary pressures are abating as labor compensation is growing at a strong rate and services inflation remains very challenging,” the note said.
Adrien Peychaud, chief economist at Cease Bank, said the SNB “has now finished resetting its monetary policy and should not cut interest rates further this year.”
The US Federal Reserve has yet to back down from its interest rate cuts, and market participants will be watching later in Thursday's session to see if the Bank of England will make a move to cut interest rates, after UK inflation fell to the 2% target for the first time. In nearly three years.
