Swiss National Bank decreases rates in December

Latest bank decision: At its meeting on 12 December, the Swiss National Bank (SNB) decided to lower the policy rate by 0.50 percentage points to 0.50%, taking total rate cuts this year to 125 basis points.

Monetary policy drivers: The key domestic factors influencing the SNB's decision were moderate economic activity, weak headline and core inflation—both have tracked below 1.0% in recent months—as well as the Bank’s lower inflation expectations for next year.

Policy outlook: The SNB stated its willingness to adjust its monetary policy as necessary to ensure inflation remains in line with the target of being positive but below 2.0%. More monetary easing is forecast in 2025, though for now our panelists don’t see a return to the negative interest rates that Switzerland experienced in the years before the Covid-19 pandemic.

Panelist insight: On the outlook, Goldman Sachs’ analysts said: “Despite the removal of the explicit easing bias from the written statement, we see today's decision and communication, indicating concerns on inflation outlook and the FX developments, as consistent with the SNB delivering more easing next year. We continue to expect two additional 25bp cuts in 2025H1 to a terminal rate of 0%, as we see a potentially sizeable hit to activity in the pipeline and further appreciation pressure on the franc.”

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