Switzerland makes second interest rate cut as major economies diverge on monetary policy easing
What are the SNB's inflation forecasts for 2024 to 2026?
The Swiss National Bank (SNB) has revised its inflation forecasts for the period of 2024 to 2026. It now expects inflation to average 1.3% in 2024, 1.1% in 2025, and 1.0% in 2026. These forecasts are based on the assumption that the SNB policy rate will be 1.25% over the entire forecast horizon. The downward revision of inflation forecasts to below 2% in the medium term is a rather dovish signal, suggesting that the pause in rate hikes today could be extended at future meetings.
What was the size of the SNB's recent interest rate cut?
The Swiss National Bank (SNB) recently cut its key interest rate by 25 basis points to 1.25%. This marks the second interest rate cut of the year, as the country's inflation flatlined at 1.4% in May. The decision to lower rates comes amid mixed sentiment over monetary policy easing among major economies. The SNB now anticipates economic growth of around 1% this year and approximately 1.5% in 2025.
Is another SNB rate cut expected later this year?
Yes, another SNB rate cut is expected later this year. The Swiss National Bank trimmed its key interest rate by 25 basis points to 1.25% in its second cut of the year. Analysts believe that underlying inflation momentum remains weak, which increases the SNB's confidence that inflation will converge to the mid-point of its inflation target. Some experts anticipate a third rate cut in September, with a potential fourth cut in December if there is still high conviction in the restrictive level of monetary policy.