Swiss central bankers lowered their benchmark interest rate for the fifth consecutive time Thursday, with a number of analysts predicting that it could be the last reduction of the current cycle, which started nearly a year ago to the day.
The Swiss National Bank said it would cut its benchmark policy rate by 25 basis points to 0.25% starting Friday. Most analysts had predicted the decision, with a few suggesting policymakers might decide on a hold due to the increasing chaos in geopolitics.
Indeed, the bank said its baseline projection of moderate growth in the global economy over the coming quarters “is currently subject to high uncertainty. The situation could change rapidly and markedly, particularly from a trade and geopolitical perspective. For example, increasing trade barriers could lead to weaker global economic development.”
The US and Europe have already fired shots in their nascent trade war, with the former slapping 25% tariffs on steel and aluminium on the later as it prepares to counter with import levies on American products such as foodstuffs, alcoholic drinks, and household goods. The White House said President Donald Trump still plans to impose what he calls reciprocal tariffs on 2 April on a wide range of countries, and he recently threatened a 200% import fee on EU wine.
Thursday’s SNB move followed a 50bp reduction in December and 25bp cuts in September, June and last March. The euro and greenback moved higher against the franc on the latest interest rate cut.
The SNB said its inflation forecasts from December were little changed. Consumer price growth is expected at 0.4% in the current year, the public lender noted, a slight increase from previous estimate of 0.3%. Next year, inflation is projected to average 0.8%, which was the same as in the last report. The bank’s initial prediction for 2027 inflation was 0.8%.
Officials estimated growth this year a 1-1.5% and the latter for next year, but that has now become harder to gauge due to threats of an expansion of the trade war and plans to shift spending around Switzerland.
That said, the bank did note, “A more expansionary fiscal policy in Europe could provide stimulus to the economy in the medium term.” The German lower house voted on Wednesday to lift some fiscal austerity that could release up to EUR 1 tn in spending for infrastructure and defence, outlays more than likely to support the neighbouring Swiss economy. The EU is also considering up to EUR 800 mn in support for member state militaries.
When it comes to growth, the country is at the mercy of outside forces, according to SNB governing board member Petra Tschudin. “The economic outlook for Switzerland has become considerably more uncertain. Against the backdrop of increased trade and geopolitical uncertainties worldwide, developments abroad continue to represent the main risk.”
Was that it?
The SNB started the reduction cycles among G10 countries last year, and it could be the first to end its monetary policy loosening, observers have suggested.
“We think today’s SNB rate cut, taking the policy rate from 0.5% to 0.25%, will be the last in this cycle,” wrote Adrian Prettejohn from Capital Economics. “We think the SNB is likely to keep the policy rate on hold at 0.25% for the foreseeable future. On top of slightly stronger underlying inflation data, the large announced fiscal package in Germany, as well as the possible loosening of fiscal policy elsewhere in Europe, has decreased the likelihood of further cuts.”
ING’s Charlotte de Montpellier wrote, “It is most likely that the SNB will keep interest rates unchanged at its next meeting in June. If the inflation outlook remains at 0.8% for the next few years, the SNB is unlikely to cut rates to 0%, avoiding proximity to negative territory. However, if the global environment deteriorates and inflation forecasts are revised downward, the SNB may be compelled to cut rates to 0%. While this is a close call, we believe a prolonged pause is the most probable outcome at this stage.”
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session_info.application_name = data.application_name;
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function start_log() {
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var months = ['Jan','Feb','Mar','Apr','May','Jun','Jul','Aug','Sep','Oct','Nov','Dec'];
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session_info.effective_latency = data.effective_latency;
session_info.mean_opinion_score = data.mean_opinion_score;
session_info.restarts = data.restarts;
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data_array.mean_opinion_score = session_info.mean_opinion_score;
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data_array.threshold = 0;
data_array.curr_delay = session_info.curr_delay;
data_array.session_length = session_info.session_length;
data_array.date = current_time;
data_array.webrtc_protocol = session_info.protocol;
data_array.ping_time = session_info.ping_time;
data_array.jitter = session_info.jitter;
data_array.packet_loss = session_info.packet_loss;
data_array.effective_latency = session_info.effective_latency;
data_array.mean_opinion_score = session_info.mean_opinion_score;
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- Size of move matches market forecasts
- Inflation forecasts little changed
- Price growth slows
- Economic estimates face “high uncertainty”
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
20 March 2024 | 10:15 GMT
Swiss central bankers lowered their benchmark interest rate for the fifth consecutive time Thursday, with a number of analysts predicting that it could be the last reduction of the current cycle, which started nearly a year ago to the day.
The Swiss National Bank said it would cut its benchmark policy rate by 25 basis points to 0.25% starting Friday. Most analysts had predicted the decision, with a few suggesting policymakers might decide on a hold due to the increasing chaos in geopolitics.
Indeed, the bank said its baseline projection of moderate growth in the global economy over the coming quarters “is currently subject to high uncertainty. The situation could change rapidly and markedly, particularly from a trade and geopolitical perspective. For example, increasing trade barriers could lead to weaker global economic development.”
The US and Europe have already fired shots in their nascent trade war, with the former slapping 25% tariffs on steel and aluminium on the later as it prepares to counter with import levies on American products such as foodstuffs, alcoholic drinks, and household goods. The White House said President Donald Trump still plans to impose what he calls reciprocal tariffs on 2 April on a wide range of countries, and he recently threatened a 200% import fee on EU wine.
Thursday’s SNB move followed a 50bp reduction in December and 25bp cuts in September, June and last March. The euro and greenback moved higher against the franc on the latest interest rate cut.
The SNB said its inflation forecasts from December were little changed. Consumer price growth is expected at 0.4% in the current year, the public lender noted, a slight increase from previous estimate of 0.3%. Next year, inflation is projected to average 0.8%, which was the same as in the last report. The bank’s initial prediction for 2027 inflation was 0.8%.
Officials estimated growth this year a 1-1.5% and the latter for next year, but that has now become harder to gauge due to threats of an expansion of the trade war and plans to shift spending around Switzerland.
That said, the bank did note, “A more expansionary fiscal policy in Europe could provide stimulus to the economy in the medium term.” The German lower house voted on Wednesday to lift some fiscal austerity that could release up to EUR 1 tn in spending for infrastructure and defence, outlays more than likely to support the neighbouring Swiss economy. The EU is also considering up to EUR 800 mn in support for member state militaries.
When it comes to growth, the country is at the mercy of outside forces, according to SNB governing board member Petra Tschudin. “The economic outlook for Switzerland has become considerably more uncertain. Against the backdrop of increased trade and geopolitical uncertainties worldwide, developments abroad continue to represent the main risk.”
Was that it?
The SNB started the reduction cycles among G10 countries last year, and it could be the first to end its monetary policy loosening, observers have suggested.
“We think today’s SNB rate cut, taking the policy rate from 0.5% to 0.25%, will be the last in this cycle,” wrote Adrian Prettejohn from Capital Economics. “We think the SNB is likely to keep the policy rate on hold at 0.25% for the foreseeable future. On top of slightly stronger underlying inflation data, the large announced fiscal package in Germany, as well as the possible loosening of fiscal policy elsewhere in Europe, has decreased the likelihood of further cuts.”
ING’s Charlotte de Montpellier wrote, “It is most likely that the SNB will keep interest rates unchanged at its next meeting in June. If the inflation outlook remains at 0.8% for the next few years, the SNB is unlikely to cut rates to 0%, avoiding proximity to negative territory.
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