THE Swiss National Bank (SNB) cut interest rates by 25 basis points on Thursday (Sep 26), its third such reduction this year, as it echoed steps to lower borrowing costs taken by the European Central Bank (ECB) and US Federal Reserve, and said more cuts could follow.
The SNB cut its policy rate to 1 per cent, the lowest level since early 2023, as expected by 30 of 32 analysts in a Reuters poll.
Markets had priced in a 55 per cent probability of a 25 basis point cut before the decision.
The decision, the last in the 12-year tenure of SNB chairman Thomas Jordan, was enabled by the taming of inflation in Switzerland – which slowed to 1.1 per cent in August and has been within the central bank’s 0 to 2 per cent target range for the last 15 months.
The Swiss franc has also appreciated in recent weeks, rising to its highest level in nine years against the euro in early August, adding to difficulties facing Switzerland’s exporters.
“The SNB’s easing of monetary policy today takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term,” the SNB said.
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The SNB’s latest cut follows similar monetary policy easing by the ECB and the Fed earlier this month.
Thomas Gitzel, chief economist at VP Bank Group, said the SNB was looking at a strongly “disinflationary trend” in the coming months and in its statement was being “unusually clear” about its thinking by flagging potential future rate cuts.
Jordan recently highlighted the success the Swiss central bank has had in fighting inflation, which enabled it to become the frontrunner among central banks in lowering borrowing costs, cutting rates in both March and June.
He also acknowledged the problems that the recent rise in the franc has created for exporters, reinforcing hopes that lower interest rates – which could weaken the safe haven currency – could be on the way.
The Swiss franc strengthened on Thursday after the 25-basis-point cut was announced.
The SNB trimmed its 2024 inflation forecast to 1.2 per cent from its 1.3 per cent forecast in June. It also cut its forecasts for 2025 to 0.6 per cent from 1.1 per cent previously and for 2026 to 0.7 per cent from 1 per cent. REUTERS
