SNB Ends the Rate-Cut Drought

This makes it the first developed nation to cut interest rates after the COVID-19 pandemic, the fall of Credit Suisse, the onset of the war in Ukraine, and persistent inflation pressures.

Switzerland’s central bank explained its decision by stating that local inflation will probably remain below 2% for the foreseeable future. Despite this announcement and a drop in inflation, economists believe that the Bank of England (BOE) will not alter its current interest rates.

Norges Bank, the Norwegian central bank, and the US Federal Reserve kept their countries’ respective interest rates unchanged. The latter is, however, expecting three rate cuts in 2024.

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CNBC said that a Reuters poll predicted that the SNB would keep rates at 1.75%. According to this report, Swiss inflation fell to 1.2%, which is below the 2% benchmark, signalling an economy ready for rate cuts.

The SNB expects further annual inflation decreases and predicts average inflation of 1.4% for 2024, 1.2% for 2025, and 1.1% for 2026 should the policy rate remain steady at 1.5% for the entire period.

CNBC cited analysts from Capital Economics, who commented:

We think inflation will come in even lower than the new SNB forecasts imply and remain around the current level of 1.2% before falling to below 1.0% next year. Accordingly, we forecast the SNB to cut rates at the September and December meetings taking the policy rate to 1%, where we think it will remain throughout 2025 and 2026.