The Swiss National Bank (SNB) decided on Thursday to lower the SNB policy rate by 0.25 percentage points to 1.0 per cent, the lowest level since early 2023. The SNB said the change is effective as of September 27. Banks' sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold, and at 0.5 per cent above this threshold. The SNB also remains willing to be active in the foreign exchange market as necessary. "Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter. Among other things, this decrease reflects the appreciation of the Swiss franc over the last three months." SNB monetary statement read. The SNB's latest easing of monetary policy – the third such reduction this year – takes the ease in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term, the statement added. The Swiss central bank cut the policy rate on March 21 and June 20. Inflation Switzerland's inflation was lower than SNB's expectations, standing at 1.1 per cent in August compared to 1.4 per cent in May. Imported goods and services in particular contributed to this fall. Overall, inflation in Switzerland is currently being driven mainly by higher prices for domestic services, the SNB noted. SNB's monetary policy committee puts average annual inflation at 1.2 per cent for 2024, 0.6 per cent for 2025 and 0. per cent % for 2026. The committee said the forecast is "based on the assumption that the SNB policy rate is 1.0 per cent over the entire forecast horizon. Without today's rate cut, the conditional inflation forecast would have been even lower." GDP The SNB anticipates Switzerland's GDP growth of around 1 per cent this year. It added that unemployment should continue to rise slightly, while the utilisation of production capacity is likely to decline slightly. Over the medium term, the growth-dampening effect of the recent franc appreciation should subside and economic development should gradually improve as a result. The SNB currently expects growth of around 1.5 per centfor 2025. "With today's easing of monetary policy, we are taking the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term." Thomas J. Jordan, Chairman of the Governing Board of the Swiss National Bank (SNB), said during the press conference. Attribution: SNB Monetary Policy assessment & Introductory remarks by the SNB Governing Board
