The Swiss National Bank will maintain its stance on interest rate cuts.
2024-09-30
■ The Swiss National Bank (SNB) has lowered its policy interest rate for three consecutive meetings and hinted at the possibility of further rate cuts.
■ The demand for the Swiss franc as a safe-haven asset is driving it higher, but the expectation of lower interest rates in Switzerland will restrain its appreciation.
On the 26th, the Swiss Central Bank (SNB) lowered its policy interest rate by 0.25 to 1.00%. This is the third consecutive meeting to cut interest rates after March and June. SNB President Jordan stated at a press conference that due to a significant decrease in inflationary pressures, "further interest rate cuts may be necessary in the coming quarters to ensure medium-term price stability. The Consumer Price Index (CPI) in August increased by 1.1% year-on-year but has declined from its peak in August 2022 (3.5% year-on-year) and has remained within the central bank's target range (0-2%) for over a year since June 2023. Vice President Schlegel, who will take office as the new president on October 1st, said that although he did not promise the path of financial policy in advance, he also hinted at the possibility of further interest rate cuts. SNB lowered its inflation forecast 2025 from 1.1% to 0.6% and 2026 from 1.0% to 0.7%. The interest rate futures market shows that the expectation of another 0.25 percentage point interest rate cut at the meeting on December 12th has exceeded 85%, and the market generally believes that the policy interest rate will gradually decrease after 2025.
On the 19th, the Swiss Economic Affairs Office (SECO) announced an expected real GDP growth rate of 1.2% for 2024, which further slowed down compared to the previous year (1.3%) due to the sluggish European economy and slowing investment demand. In 2025, driven by the recovery of the European economy, the growth rate is expected to rebound to 1.6% (all adjusted for sports events). Switzerland is home to the headquarters of many sports organizations, such as the International Olympic Committee and FIFA. The licensing and marketing activities for hosting events have created added value for Switzerland and boosted its GDP. However, the slowdown of the European economy and the strengthening of the Swiss Franc (CHF) have had a negative impact on the country's export enterprises. After adjusting for sports events, the economic growth rates in 2024 and 2025 are expected to be lower than the average since 1981 (1.8%). Although the demand for CHF as a safe-haven asset has increased due to concerns about the slowdown of the US economy and tensions in the Middle East, SNB has shown caution towards the appreciation of CHF. As expectations of lower interest rates increase, the possibility of CHF continuing to appreciate will weaken.
■ The demand for the Swiss franc as a safe-haven asset is driving it higher, but the expectation of lower interest rates in Switzerland will restrain its appreciation.
On the 26th, the Swiss Central Bank (SNB) lowered its policy interest rate by 0.25 to 1.00%. This is the third consecutive meeting to cut interest rates after March and June. SNB President Jordan stated at a press conference that due to a significant decrease in inflationary pressures, "further interest rate cuts may be necessary in the coming quarters to ensure medium-term price stability. The Consumer Price Index (CPI) in August increased by 1.1% year-on-year but has declined from its peak in August 2022 (3.5% year-on-year) and has remained within the central bank's target range (0-2%) for over a year since June 2023. Vice President Schlegel, who will take office as the new president on October 1st, said that although he did not promise the path of financial policy in advance, he also hinted at the possibility of further interest rate cuts. SNB lowered its inflation forecast 2025 from 1.1% to 0.6% and 2026 from 1.0% to 0.7%. The interest rate futures market shows that the expectation of another 0.25 percentage point interest rate cut at the meeting on December 12th has exceeded 85%, and the market generally believes that the policy interest rate will gradually decrease after 2025.
On the 19th, the Swiss Economic Affairs Office (SECO) announced an expected real GDP growth rate of 1.2% for 2024, which further slowed down compared to the previous year (1.3%) due to the sluggish European economy and slowing investment demand. In 2025, driven by the recovery of the European economy, the growth rate is expected to rebound to 1.6% (all adjusted for sports events). Switzerland is home to the headquarters of many sports organizations, such as the International Olympic Committee and FIFA. The licensing and marketing activities for hosting events have created added value for Switzerland and boosted its GDP. However, the slowdown of the European economy and the strengthening of the Swiss Franc (CHF) have had a negative impact on the country's export enterprises. After adjusting for sports events, the economic growth rates in 2024 and 2025 are expected to be lower than the average since 1981 (1.8%). Although the demand for CHF as a safe-haven asset has increased due to concerns about the slowdown of the US economy and tensions in the Middle East, SNB has shown caution towards the appreciation of CHF. As expectations of lower interest rates increase, the possibility of CHF continuing to appreciate will weaken.