Swiss National Bank cuts policy rate by 25bps to 1%

September 26, 2024 (MLN): The Swiss National Bank has lowered the SNB policy rate by 25 basis points to 1%, said a statement issued by the bank on Thursday.

The change applies from tomorrow, September 27, 2024.

Banks’ sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold, and at 0.5% above this threshold, it said.

SNB  said that it also remains willing to be active in the foreign exchange market as necessary.

Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter, it noted.

Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months. 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," it noted.

Inflation in the period since the last monetary policy assessment was lower than expected, standing at 1.1% in August compared to 1.4% in May. Imported goods and services in particular contributed to the decline.

Overall, inflation in Switzerland is currently being driven mainly by higher prices for domestic services. "The new conditional inflation forecast is significantly lower than that of June," it added.

The stronger Swiss franc, the lower oil price, and electricity price cuts announced for next January have contributed to the downward revision.

The stronger decline in inflation also means that weaker second-round effects are expected in the medium term.

The new forecast is within the range of price stability over the entire forecast horizon. It puts average annual inflation at 1.2% for 2024, 0.6% for 2025 and 0.7% for 2026.

"The forecast is based on the assumption that the SNB policy rate is 1.0% over the entire forecast horizon," SNB noted.

Without today’s rate cut, the conditional inflation forecast would have been even lower, it said.

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