The Swiss National Bank looks ready to cut interest rates for a third consecutive time this year, with at least one observer predicting a half-point reduction.
An economists’ survey forecast a 25-basis point cut from the Swiss central bank this Thursday, a move that would take its benchmark policy rate to 1%.
In the wake of global interest rate hikes to battle a surge in post-pandemic inflation, the SNB initiated rate cuts among G10 nations with a surprise quarter-point reduction in March, a move repeated in June a fortnight after the European Central Bank also lowered its main interest rates by a quarter point.
Now Swiss officials are facing a similar scenario following the ECB’s 25bp cut two weeks ago. But this time, the Fed has also jumped on the lower-rate bandwagon with last week’s 50bp cut in its benchmark rate.
The half-point move from US central bankers may be something the Swiss could choose to emulate, according to Adrian Prettejohn from Capital Economics. “We think SNB Chairman Thomas Jordan will probably use his last meeting to once again surprise markets by cutting the policy rate by 50bp to 0.75%. Policymakers will be unhappy with the franc’s recent appreciation and will use rate cuts to try and stifle its ascent.”
Switzerland is highly reliant on euro markets, which is likely fanning dovish sentiment among officials following the latest ECB decision to loosen monetary policy, with further steps becoming more likely as economic prospects worsen. And now that the US has lowered its rates, little seems to stand in the way of Swiss cuts.
HSBC said it only expects a 25bp cut. “The significant drop in oil prices and the marked appreciation of the CHF since July (driven by safe-haven flows) should prompt the SNB to revise down its inflation forecasts from June. If a rate cut is announced, it will be interesting to see if the bank signals further cuts beyond September or takes a more cautious stance.”
The press conference scheduled after the meeting could be a time for public lender’s chairman-designate to take a larger role. The Swiss government has named SNB Vice Chairman Martin Schlegel as the replacement for Jordan. The incoming captain of Swiss monetary policy was reportedly a bassist in rock and party bands and is a vegetarian, novel characteristics for the country’s lead central banker.
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- Market forecasts 25-basis point reduction
- ECB has lowered twice, Fed once since SNB’s June cut
- Decision due Thursday at 07:30 GMT/09:30 CET
- Press conference set for 08:00 GMT/10:00 CET
By Eric Culp, European Editor
LiveSquawk News
@EricCulpLS
24 September 2024 | 10:15 GMT
The Swiss National Bank looks ready to cut interest rates for a third consecutive time this year, with at least one observer predicting a half-point reduction.
An economists’ survey forecast a 25-basis point cut from the Swiss central bank this Thursday, a move that would take its benchmark policy rate to 1%.
In the wake of global interest rate hikes to battle a surge in post-pandemic inflation, the SNB initiated rate cuts among G10 nations with a surprise quarter-point reduction in March, a move repeated in June a fortnight after the European Central Bank also lowered its main interest rates by a quarter point.
Now Swiss officials are facing a similar scenario following the ECB’s 25bp cut two weeks ago. But this time, the Fed has also jumped on the lower-rate bandwagon with last week’s 50bp cut in its benchmark rate.
The half-point move from US central bankers may be something the Swiss could choose to emulate, according to Adrian Prettejohn from Capital Economics. “We think SNB Chairman Thomas Jordan will probably use his last meeting to once again surprise markets by cutting the policy rate by 50bp to 0.75%. Policymakers will be unhappy with the franc’s recent appreciation and will use rate cuts to try and stifle its ascent.”
Switzerland is highly reliant on euro markets, which is likely fanning dovish sentiment among officials following the latest ECB decision to loosen monetary policy, with further steps becoming more likely as economic prospects worsen. And now that the US has lowered its rates, little seems to stand in the way of Swiss cuts.
HSBC said it only expects a 25bp cut. “The significant drop in oil prices and the marked appreciation of the CHF since July (driven by safe-haven flows) should prompt the SNB to revise down its inflation forecasts from June. If a rate cut is announced, it will be interesting to see if the bank signals further cuts beyond September or takes a more cautious stance.”
The press conference scheduled after the meeting could be a time for public lender’s chairman-designate to take a larger role. The Swiss government has named SNB Vice Chairman Martin Schlegel as the replacement for Jordan. The incoming captain of Swiss monetary policy was reportedly a bassist in rock and party bands and is a vegetarian, novel characteristics for the country’s lead central banker.
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