Central Bank cuts rates in September

Latest bank decision: At its meeting on 26 September, the Swiss National Bank (SNB) trimmed its policy rate from 1.25% to 1.00%, following same-sized cuts in March and June.

Low inflation drives decision: The decision to cut rates was driven by subdued inflation, which has been in line with the SNB’s target of below 2% so far this year. Moreover, the Central Bank revised down its inflation forecasts for the coming quarters sharply relative to June due largely to the strong franc, lower global oil prices and electricity price cuts announced for January 2025.

Further rate cuts on the cards: Further monetary easing is likely ahead, with the Bank stating that “further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability”.

Panelist insight: On the outlook, ING’s Charlotte de Montpellier said: “Given the inflation forecasts, we expect a further 25bp rate cut in December. A final cut could then take place in 2025, but it seems unlikely that the SNB will decide to cut its rate much lower than the 0.5% level as long as inflation remains in the 0-2% range. In our view, inflation would have to be at risk of returning to negative territory for the SNB to decide to go lower.”  Goldman Sachs analysts took a similar view: “Given the SNB's dovish guidance and the new inflation projections, we now expect a further cut of 25bp at the December meeting, to a terminal rate of 0.75% (vs 1.0% before). We see risks skewed towards more easing in the event of further downside surprises to inflation and CHF strength.”

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