Swiss National Bank (SNB) Policy Update
Article published on December 13th, 2024 – 9:334AM UK Time
Policy Decision and Outlook
The Swiss National Bank (SNB) cut its policy rate by 50bps to 0.50%, lower than the expected 0.75%, but reiterated its willingness to intervene in foreign exchange markets as necessary. The central bank emphasized its commitment to monitoring inflation and maintaining price stability over the medium term, signaling further rate adjustments if needed.
Inflation Trends
- Inflation in Switzerland remains subdued, with both goods and services contributing to recent declines.
- The SNB noted that its updated inflation forecast is lower than September’s, reflecting weaker price pressures for oil and food products. This reduction aligns with the broader policy adjustment.
Growth
- Q3 growth was modest, as expected, with stronger performance in the services sector offset by a decline in manufacturing output.
- Employment growth was subdued, and unemployment saw a slight increase, though production capacity utilization remained normal.
Key Remarks from Chair Schlegel
Chair Schlegel stressed that while the SNB does not favor negative interest rates, they are effective tools and could be used again if required. However, he highlighted that the likelihood of reverting to negative rates has diminished significantly. Schlegel reiterated that rate cuts remain the primary policy instrument for easing, and inflationary pressures have markedly decreased over the medium term.
Key Takeaways
- Schlegel emphasized the importance of stabilizing inflation within the 0–2% target range, noting the SNB can tolerate temporary deviations below this range.
- He reaffirmed the SNB’s flexibility in responding to economic and inflationary developments but underlined a clear preference to avoid negative rates unless absolutely necessary.
This stance reflects the SNB’s cautious approach to monetary easing, prioritizing stability while maintaining room for future policy adjustments.