Swiss central bankers cut their benchmark interest rate for the third consecutive time Thursday in a move that was largely expected by economists.
The Swiss National Bank said it would lower its benchmark policy rate by 25 basis points to 1.00% starting Friday. Most analysts had predicted the step, with some suggesting officials might decide on a 50bp reduction. The move followed previous quarter-point cuts in March and June.
“Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter,” the bank said. “Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months.”
As price growth wanes, more reductions could be needed, the SNB explained. “Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.”
“The dovish shift is massive,” Frederik Ducrozet from Pictet Wealth Management wrote on X. “Inflation forecasts revised massively lower, to as low as 0.5%! More rate cuts are very likely in coming quarters, well below neutral and closer to zero.”
Thomas Gitzel, chief economist at VP Bank, wrote: “The SNB will do everything in its power to prevent the inflation rate from falling too much, which is why there will be further interest rate cuts.
“It is fair to assume that another cut of 25 basis points will be on the agenda in December and then again in March.”
The bank said it anticipates economic growth of around 1% this year and 1.5% in 2025.
Lower inflation is expected in the months and years ahead, the SNB said.
Slower price growth dictates policy
The bank said inflation in the period since the last monetary assessment in June was lower than expected, falling to 1.1% in August versus 1.4% in May.
“The new conditional inflation forecast is significantly lower than that of June,” the bank noted. “The stronger Swiss franc, the lower oil price and electricity price cuts announced for next January have contributed to the downward revision.”
The SNB said it now expects inflation this year to average 1.2% versus its June forecast of 1.3%. It lowered the price growth projection for 2025 to 0.6% from 1.1%, with 0.5% anticipated in the final three quarters of the year. Finally, the bank reduced its outlook for 2026 to 0.7% from 1.0%.
“Uncertainty about the future path of inflation is still high,” warned outgoing SNB Chairman Thomas Jordan. “Overall, we currently see the downside risks to inflation as greater than the upside risks.”
Jordan is scheduled to step down at the end of the month after 12 years at the helm.
He noted that by starting to cut in March, the bank’s monetary policy is on a good path, a summation seconded by his replacement, current Vice Chairman Martin Schlegel, who takes charge on 1 October. He added that Thursday was Jordan's 42nd post-rate decision press conference.
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- Third reduction of 2024 in-line with market forecasts
- Consumer price growth falling rapidly
- Stage set for further cuts
- Bank plans to stay active in currency markets
- More cuts “may become necessary” in coming quarters – SNB
- Analysts talk of dovish shift
- Chairman Jordan to depart at month’s end
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
26 September 2024 | 08:50 GMT
Swiss central bankers cut their benchmark interest rate for the third consecutive time Thursday in a move that was largely expected by economists.
The Swiss National Bank said it would lower its benchmark policy rate by 25 basis points to 1.00% starting Friday. Most analysts had predicted the step, with some suggesting officials might decide on a 50bp reduction. The move followed previous quarter-point cuts in March and June.
“Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter,” the bank said. “Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months.”
As price growth wanes, more reductions could be needed, the SNB explained. “Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.”
“The dovish shift is massive,” Frederik Ducrozet from Pictet Wealth Management wrote on X. “Inflation forecasts revised massively lower, to as low as 0.5%! More rate cuts are very likely in coming quarters, well below neutral and closer to zero.”
Thomas Gitzel, chief economist at VP Bank, wrote: “The SNB will do everything in its power to prevent the inflation rate from falling too much, which is why there will be further interest rate cuts.
“It is fair to assume that another cut of 25 basis points will be on the agenda in December and then again in March.”
The bank said it anticipates economic growth of around 1% this year and 1.5% in 2025.
Slower price growth dictates policy
The bank said inflation in the period since the last monetary assessment in June was lower than expected, falling to 1.1% in August versus 1.4% in May.
“The new conditional inflation forecast is significantly lower than that of June,” the bank noted. “The stronger Swiss franc, the lower oil price and electricity price cuts announced for next January have contributed to the downward revision.”
The SNB said it now expects inflation this year to average 1.2% versus its June forecast of 1.3%. It lowered the price growth projection for 2025 to 0.6% from 1.1%, with 0.5% anticipated in the final three quarters of the year. Finally, the bank reduced its outlook for 2026 to 0.7% from 1.0%.
“Uncertainty about the future path of inflation is still high,” warned outgoing SNB Chairman Thomas Jordan. “Overall, we currently see the downside risks to inflation as greater than the upside risks.”
Jordan is scheduled to step down at the end of the month after 12 years at the helm.
He noted that by starting to cut in March, the bank’s monetary policy is on a good path, a summation seconded by his replacement, current Vice Chairman Martin Schlegel, who takes charge on 1 October. He added that Thursday was Jordan's 42nd post-rate decision press conference.
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