Swiss National Bank hints at further rate cuts after latest reduction
SNB cuts rates by 25 basis points for third time this year
Chairman Jordan says more cuts may be necessary
SNB slashes inflation forecasts
Swiss franc rises after decision
Strong franc has caused problems for Swiss exporters
Adds comments from incoming chairman in paragraphs 7-11
By John Revill
ZURICH, Sept 26 (Reuters) -The Swiss National Bank reduced interest rates by 25 basis points on Thursday, echoing steps to lower borrowing costs by the European Central Bank and U.S. Federal Reserve, and left the door wide open for more rate cuts as inflation cools sharply.
The SNB cut its policy rate to 1.00%, the lowest level since early 2023, as expected by analysts in a Reuters poll.
The cut was its third such reduction this year as the central bank dialled back measures designed to combat inflation.
The decision, the last in the 12-year tenure of SNB Chairman Thomas Jordan, was enabled by the taming of price rises in Switzerland - which slowed to 1.1% in August and has been within the central bank's 0-2% target range for the last 15 months.
The SNB is ready to cut interest rates again, Jordan said after the decision, noting that inflationary pressure in Switzerland had decreased significantly.
"Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term," he told a press conference after his 42nd and last monetary policy meeting.
His successor Martin Schlegel said the SNB's view that inflation was likely to fall further meant further cuts were likely, although he did not give any guarantees.
"It's important to know that we don't give forward guidance and we never pre commit, but if you look at monetary conditions, the situation now, it's not unlikely that we also cut in December," Schlegel told Reuters in an interview.
The current SNB Vice Chairman, who takes charge of the central bank on Tuesday, did not give guidance on possible moves in the more distant future.
The SNB's successin fighting inflation has enabled it to become the frontrunner among central banks in lowering borrowing costs, cutting rates in both March and June.
Schlegel said decision to cut rates again was helped by weaker inflationary pressure in Switzerland, with the SNB slashing itsinflation forecasts for 2025 and 2026 and predicting consumerprice growth of 0.6% in the second quarter of 2027.
He also highlighted the rise in the value of the Swiss franc as a contributor to low inflation and acknowledged the difficulties the safe haven currency caused for Swiss exporters already facing weak demand from abroad
The franc has appreciated in recent weeks, hitting its highest level in nine years against the euro in early August.
It strengthened after the 25-basis-point cut, which followedsimilar monetary policy easing by the ECB and the Fed earlier this month, was announced.
Charlotte de Montpellier, senior economist at ING, said the SNB's 25 point reductionwas "the most dovish you could ask for."
"Not only is the SNB making it very clear that further rate cuts may be necessary, but it has also revised its inflation forecasts very sharply downwards, and much more sharply than expected," she said.
CUTS ON THE WAY
Karsten Junius, chief economist at J Safra Sarasin, saw the bank's outlook as more dovish than markets expected.
"This is the strongest hint towards future policy decisions that the SNB has given in the past years and a break from previous communication patterns," he said.
The SNB trimmed its 2024 inflation forecast to 1.2% from its 1.3% prediction in June. It also cut its forecasts for 2025 to 0.6% from 1.1% previously and for 2026 to 0.7% from 1.0%.
"With inflation now expected to average 0.6% in 2025 and 0.7% in 2027, the SNB seems to want to send a very clear signal to the markets that further rate cuts are on the way, in order to weaken the Swiss franc," said de Montpellier at ING.
Reporting by John Revill; Editing by Dave Graham and Toby Chopra
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
