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Switzerland Monetary Policy March 2024

Switzerland: Central Bank cuts rates in March

At its meeting on 21 March, the Swiss National Bank (SNB) trimmed its policy rate from 1.75% to 1.50%, becoming the first major developed-economy central bank to cut rates since global monetary authorities embarked on rate hikes in 2021–2023.

The decision to cut rates was driven by subdued inflation, which was in line with the SNB’s target of below-2% for the ninth straight month in February. Moreover, the Central Bank projects inflation to remain within target going forward, and revised down its inflation forecasts notably relative to last December; for instance, the Bank now sees just 1.4% inflation in Q4 2024, compared to 1.9% previously. Monetary easing also aimed to support economic activity.

The Bank’s forward guidance was open-ended. The Consensus among our panelists is for interest rates to fall further by end-2024, in light of mild price pressures.

On the outlook, ING analysts said:

“Unless there is a very nasty surprise in the international economic environment that causes inflationary pressures to rise sharply again, the SNB’s tone today and the huge downward revision to inflation forecasts suggest that a further cut is very likely in June to bring the key rate down to 1.25%. A further rate cut in September is also likely.”

In contrast, Goldman Sachs analysts are more hawkish:

“While we see limited room for the SNB to cut further given our estimate of the neutral rate at around 1.25%, we continue to expect a further and final 25bp cut at the SNB’s June meeting.”

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