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Tags: Rate Cut, SNB, Swiss franc, Switzerland
In March 2024, the Swiss National Bank unexpectedly decided to lower its primary interest rate by 0.25 percentage points to 1.5%. The action represented the institution’s first reduction in nine years, setting a precedent as the first major central bank to initiate a loosening of monetary policy. This development ensued as Swiss inflation dropped to 1.2% in February, extending a nine-month trend of prices within the SNB’s target zone of 0-2%, reflecting maintained price equilibrium.
The central bank acknowledged the diminishing inflationary trends and the Swiss franc’s real-term appreciation over the preceding year as influencing factors in its decision. With expectations that inflation will continue to align with the stability range in the coming years, the policymakers will keep a watchful eye to ensure it does so.
Projections by the SNB estimate that average annual inflation rates will hover at 1.4% for 2024, decline slightly to 1.2% for 2025, and then to 1.1% for 2026. Concurrently, economic expansion is predicted to be subdued in the near term, with this year’s growth projections standing at approximately 1%.
In the wake of the Swiss National Bank’s move, the Swiss franc depreciated, surpassing the 0.895 mark against the US dollar, reaching its lowest point since November 13th.
(Policy Rate Levels,Swiss National Bank)
(USDCHF Monthly Chart)
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