On Thursday, 20 June 2024, the Swiss National Bank (SNB) reduced its interest rates by 25 basis points to 1.25%. This cut follows in the wake of the first, which was done in March 2024. It stands out as other major monetary policymakers seem ambivalent about following suit.
SNB Prunes Interest Rates As Major Economies Hesitate
In a Reuters poll, two-thirds of economists predicted this interest rate decrease. The Swiss franc (CHF) buckled somewhat after this announcement and was down 0.3% against the EUR and 0.5% against the USD at one stage.
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The SNB’s predictions peg inflation at 1.3% for 2024, 1.1% for 2025, and 1.0% for 2026. In light of these developments, the SNB expects economic growth of approximately 1% for 2024 and 1.5% for 2025, coupled with a slight rise in unemployment and minor dips in production. The SNB stated:
Over the medium term, economic activity should improve gradually, supported by somewhat stronger demand from abroad.
In a CNBC interview, the SNB’s chairperson, Thomas Jordan, emphasised the role that current inflation rates played in its decision. He said:
[We have} inflationary pressures that slightly declined, we have also [a] strong Swiss franc, and we have an increase in uncertainty globally. So, we came to the conclusion that, given those circumstances, it is best to lower rates by 25 basis points.
Based on CNBC data, Switzerland has the second-lowest interest rate in the Group of Ten democracies. The European Central Bank (ECB) cut its interest rates earlier in June 2024. It is yet to be seen whether the Bank of England (BOE) and the US Federal Reserve will mirror this action.
