Monetary policy SNB lowers key interest rate to 1.25 percent
The Swiss National Bank (SNB) is doing it again: it is lowering the key interest rate. Lower inflationary pressure has enabled it to take this step.
20.06.2024, 09:36
20.06.2024, 13:42
SDA
The so-called SNB key interest rate will be lowered by 0.25 percentage points to 1.25 percent, as the SNB announced on Thursday. The SNB is thus continuing its interest rate turnaround and further easing its monetary policy.
This is the SNB's second easing step, after it had already lowered its key interest rate by a quarter of a percent in March, ahead of all other major central banks.
In the meantime, the European Central Bank (ECB) has also taken its first triple step downwards. The US Federal Reserve, on the other hand, has recently extended its interest rate pause once again.
Inflation in the price stability range
The underlying inflationary pressure in Switzerland has fallen again compared to the previous quarter, the SNB explained in a communiqué. By lowering the SNB key interest rate, it was able to maintain appropriate monetary conditions.
However, the SNB will continue to monitor the development of inflation closely, the monetary authorities emphasized. It will adjust its monetary policy "if necessary" in order to ensure price stability in the medium term as well.
Inflation in Switzerland rose again slightly to 1.4 percent in May. According to the SNB, this was mainly due to higher rents and more expensive oil products. Services in the tourism sector also cost more today.
The current inflation in Switzerland is therefore primarily determined by inflation in domestic services, the SNB concluded. According to its latest forecast, it assumes that inflation will average 1.3 percent in 2024.
Values of only 1.1 and 1.0 percent are also expected for 2025 and 2026. The SNB's slightly lower forecasts than three months ago are due to somewhat lower second-round effects.
Swiss franc as a weapon against inflation
And the SNB is still prepared to be active on the foreign exchange market if necessary. According to Chairman of the Governing Board Thomas Jordan, the Swiss franc depreciated from January to the end of May.
However, in recent weeks it has gained significantly in value again. This is mainly due to political uncertainties in Europe. Uncertainty about the further development of inflation therefore remains high.
The SNB will therefore continue to monitor the development of inflation closely and adjust its monetary policy - if necessary - in order to ensure price stability in the medium term. And the SNB is still prepared to be active on the foreign exchange market if necessary.
The Swiss franc is the SNB's second weapon in its fight against inflation. Because with a stronger domestic currency, less inflation is imported from abroad. However, inflationary pressure has also eased slightly in other countries recently, the SNB noted.
Main risk global economy
Developments abroad also represent the main risk for the Swiss economy. The currency guardians are currently assuming a slight increase in foreign demand in the medium term.
The SNB is sticking to its previous assessment of domestic economic growth for the current year. It continues to forecast growth in gross domestic product (GDP) of around 1%. For 2025, it expects growth of around 1.5 percent.
