The Swiss National Bank decided on Thursday to lower its key rate to 1.5%, compared to 1.75% previously, breaking with the monetary status quo observed since September 2023 and to the great surprise of the majority of observers.
After five monetary tightenings carried out from June 2022, which increased the SNB’s key rate from -0.75% to +1.75% in June 2023, the Swiss central bank opted at the end of last September for an initial status monetary quo, reiterated in December.
Inflation has continued to decline in recent months in Switzerland, going from 1.7% in December to 1.3% in January and 1.2% in February. Consumer prices are therefore clearly within the target of the price stability objective of 0% to 2% defended by the SNB. And this is significantly less than the 2.6% recorded in February in the euro zone and the 3.2% recorded the same month in the United States.
“At the right time”
The SNB is also optimistic about future price developments. It is counting on inflation of 1.4% this year, whereas it had previously expected 1.9%. The slowdown in the rise in prices of certain categories of goods turned out to be more marked than expected. For 2025, inflation is expected at 1.2%, compared to 1.6% in the previous report.
The president of the BNS, Thomas Jordan, who recently announced his departure at the end of September, is not letting down his guard. “Uncertainty remains relatively high. This is why we will continue to carefully monitor the evolution of inflation and will adapt our monetary policy again, if necessary,” he warned during a press conference. .
The goal of the Swiss National Bank, which beat other central banks by reducing its key rate on Thursday, was not to be the first or the last but to make a decision at the “right time” for Switzerland, said its president.
The objective was to ensure “adequate monetary conditions”, declared Thomas Jordan during a press conference in Zurich, inflation having been below the 2% mark since June 2023 that the monetary institution is targeting.
Against a current
This announcement comes as the American Federal Reserve (Fed) decided on Wednesday to once again maintain its rates at the highest in more than twenty years, with overnight rates remaining between 5.25% and 5.50%.
The European Central Bank (ECB) adopted the same wait-and-see attitude at the beginning of March, with the rate on deposits, which is the benchmark, having been maintained at its historic high of 4%.
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The SNB also wants to be relatively optimistic about Swiss economic growth. In 2024, it targets growth in gross domestic product (GDP) of around 1%, compared to a range of 0.5% to 1.0% previously. This expectation of sluggish growth can be explained by weak external demand and the appreciation of the franc in real terms recorded last year.
The main risk for Swiss growth is to see the global economy decline more sharply than expected. But for now, the Swiss central bank is expecting moderate global growth.
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