Swiss National Bank cuts interest rate to 1.00%

The Swiss National Bank (SNB) announced a 25 basis point cut in its policy rate on Thursday, September 26, 2024, bringing it down to 1.00%, as expected.

This marks the third consecutive rate cut by the central bank, which also indicated that further cuts may be needed in the coming quarters to ensure price stability over the medium term.

Key points from the Swiss National Bank statement:

• The SNB reduced the monetary policy rate by 25 basis points to 1.0%, effective from September 27, 2024
• Their inflation forecast was cut significantly from 1.3% in June for 2024 to 1.2%, 2025 was revised lower from 1.1% to 0.6%, all now in the price stability range.
• The bank remains ready to intervene in the foreign exchange markets if necessary
• GDP growth forecast at around 1% for 2024, rising to 1.5% for 2025
• Vulnerabilities in the mortgage and real estate markets have eased slightly, but they still exist

Link to Swiss National Bank’s September press release

This result was pretty much in line with market expectations, as discussed in the Babypips.com Event Guide released earlier this week. Also mentioned in the Event Guide, the franc actually jumped higher when the statement was released, as seen in the chart below.

Market reactions

CHF Overlay vs. Major Currencies Chart by TradingView

The Swiss franc initially strengthened following the SNB announcement, contrary to what might be expected after an interest rate cut.

This reaction may have been profit-taking when expectations of a 25bps cut were confirmed, but there is also an argument that those who priced in an even bigger rate cut may have quickly pulled short on the event.

Regardless of the situation for a rebound, as of this writing, the franc has moved into erratic range-bound behavior for the rest of Thursday’s session, likely due to the market’s quick turnaround on a heavy round of Fed talk in the US session , along with top-level US economic updates such as US GDP, jobless claims and durable goods orders.