Mon, Mar 18th 2024
According to experts, amidst inflation the Swiss National Bank will hold key interest rate at 1.75%.
The SNB will probably leave the key interest rate at the current level of 1.75% at its monetary policy assessment on Thursday. The vast majority of experts agree that the Swiss central bankers see no need for action in view of the current situation.
The upcoming assessment would be the third time in a row that it has stood still. From June 2022, the central bank had previously raised the key interest rate from -0.75% at the time to the current level in just five steps, putting an end to the years of negative interest rates in Switzerland.
In the meantime, however, inflation has fallen from its peak of 3.5% in August 2022 to 1.2% recently and therefore the SNB is back within their target range of 0% to 2%.
“Inflation has fallen significantly, but the SNB cannot yet be certain that second-round effects will no longer be an issue,” says UBS economist Alessandro Bee.
According to Patrick Häfeli, strategist at St. Galler Kantonalbank, “at the current level, the Swiss inflation rate is once again within the SNB’s comfort zone and will remain so despite a slight increase in the coming months due to rent increases”. However, this alone will not force the SNB to cut interest rates quickly.
After the Swiss franc had seen a rapid appreciation at the end of 2023, it has clearly retreated against the euro and US dollar in recent weeks.
“This has limited the negative effects on the export industry and has already improved monetary conditions,” explains Raiffeisen chief economist Fredy Hasenmaile.
While the SNB beat the ECB to the punch with its first interest rate hike in June 2022, most observers do not expect it to go ahead this time either.
However, there are exceptions: David Kohl from Julius Baer and Daniel Lüchinger from Graubündner Kantonalbank, for example, expect an initial interest rate cut as early as this week.
“We assume that the SNB will lower the key interest rate to 1.50 percent, thereby once again demonstrating its independence,” says Lüchinger.
All in all, the situation for the SNB is relatively comfortable with falling inflation and solid economic growth.
Although it cannot be completely ruled out that the recently announced resignation of SNB Chairman Thomas Jordan as of September has changed the situation, it is rather unlikely.
Some observers speculate that Jordan could leave it to his successor to herald a turnaround in interest rates. Taking office with the first interest rate cut in two years would certainly be a rewarding option for a new president, they say.
©Keystone/SDA
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