A view of the headquarters of the Swiss National Bank (SNB), before a press conference in Zurich, Switzerland, March 21, 2024.
Denis Balibouse | Reuters
The Swiss National Bank on Thursday cut its key interest rate by 25 basis points to 1.25%, continuing the cut at a time when sentiment about easing monetary policy remains mixed across economies. big economy.
Two-thirds of economists polled by Reuters have expected The SNB will decide in favor of a 25 basis point cut to 1.25%.
The Swiss franc weakened following the announcement, with Euro increased 0.3% and US Dollar up 0.5% against the Swiss at 8:55 a.m. London time.
Following Thursday’s decision, the Swiss central bank pegged its conditional inflation forecast at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026. The numbers The data assumes an SNB interest rate of 1.25% over the forecast period.
country’s inflation remained unchanged at 1.4% in May after a spike in April and expected to average similar levels for all of 2024, according to the latest predictions of the SNB.
The Swiss bank said it now forecasts economic growth of around 1% this year and around 1.5% in 2025, predicting a slight rise in unemployment and a slight decline in energy use. production force.
“In the medium term, economic activity will improve gradually, supported by stronger demand from abroad,” the SNB said.
In a June 14 note, analysts at Nomura described the cut as likely a “balanced decision” and signaled that “underlying inflation dynamics remain weak, which could “likely to increase the SNB’s confidence that inflation will converge to its midpoint.” inflation target.”
Switzerland currently has the second lowest interest rate among the Group of 10 democracies, after Japan. It became First major economy to cut interest rates back in late March and early this month followed by the European Central Bankand questions are now being raised about whether the country will cut interest rates for a third time this year.
Kyle Chapman, FX market analyst at Ballinger Group, said the SNB inflation forecast “suggests that there are still some restrictions that need to be lifted this year and to me, that’s a heavy signal suggests another rate cut will take place in September.” “I expect the SNB to follow up with a third cut next quarter and potentially deliver a fourth cut in December if there remains high confidence in the level of restrictiveness of monetary policy.”
He signaled that this outlook leaves the Swiss franc in a “vulnerable position.”
But the US Federal Reserve hasn’t blinked yet and market participants will be watching later in Thursday’s session to see if the Bank of England takes the leap to cut, after UK inflation fell to the 2% target for the first time in nearly three years.
