SNB cuts demand deposit rate by 25 bps to 1.0% as expected

The Swiss National Bank (SNB) announced on Thursday that it cut its benchmark demand deposit rate by 25 basis points (bps) from 1.25% to 1.00% following the conclusion of its quarterly monetary policy review.

The decision was aligned with market expectations.

The SNB has cut its key rate by 50 bps so far this year, becoming the first major central bank to implement an accommodative policy pivot.

Summary of the NBS policy statement

Ready to intervene in the foreign exchange market as needed.

The SNB sees Swiss growth in 2024 at around 1.0% (previous forecast was around 1%).

The SNB sees Switzerland’s growth in 2025 at around 1.5% (the previous forecast was 1.5%).

The SNB sees inflation in 2024 at 1.2% (the previous forecast was 1.3%).

The SNB sees inflation in 2025 at 0.6% (the previous forecast was 1.1%).

The SNB sees inflation in 2026 at 0.7% (the previous forecast was 1.0%).

Inflationary pressure in Switzerland again fell significantly compared to the previous quarter.

The decline reflects the appreciation of the Swiss franc over the past three months.

Further cuts in the NBS policy rate may become necessary in the coming quarters to ensure price stability over the medium term.

Momentum in the mortgage and real estate markets in recent quarters has been weaker than in previous years.

Currently, inflation in Switzerland is mainly driven by higher prices for domestic services.

Inflation in many countries remains above central bank targets.

Growth momentum in the chemical/pharmaceutical industry was particularly strong, while growth in many other industries was moderate.

Market reaction to the NBS interest rate decision

In an initial reaction to the expected SNB rate cut decision, the USD/CHF pair fell almost 60 pips to test 0.8460 before returning to near 0.8480, where it is now oscillating. The pair is down 0.22% on the day.