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Switzerland Monetary Policy September 2023

Switzerland: SNB keeps rates unchanged in September

At its meeting on 21 September, the Swiss National Bank (SNB) kept its policy rate at 1.75%. Market analysts were expecting a 25 basis point increase. Moreover, the Bank reiterated its willingness to intervene in FX markets by selling foreign currency, in order to support the franc and thus tame imported price pressures.

The decision to keep rates unchanged was driven by the fact that inflation more than halved from January to August, and now comfortably meets the SNB’s target of below-2% inflation. Moreover, the SNB was downbeat about prospects for the economy in the second half of 2023.

Regarding forward guidance, the SNB stated that it “cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability”. That said, the Central Bank is likely to stay on hold at the final meeting of the year on 14 December, before rate cuts in 2024, given our Consensus for mild inflation ahead.

On the outlook, analysts at ING said:

“If, as we expect, the economic outlook continues to deteriorate over the next few months, it is likely that today’s pause will extend into December and 2024. A further rate hike in December cannot be ruled out, but at this stage the most likely outcome is that the rate hike cycle effectively ended in June.”

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