Swiss National Bank cuts interest rates for the third time as scheduled! Will the European Central Bank follow suit?
The Swiss National Bank lowered its benchmark interest rate by 25 basis points to 1.00% on September 26, marking the third consecutive rate cut. Switzerland's GDP is expected to grow by 1.5% in 2025, with an inflation rate of 1.2% in 2024. The Swiss franc's appreciation and the decline in oil prices have contributed to the downward revision of the inflation forecast. Both the USD/CHF and EUR/CHF pairs have experienced short-term declines. Deutsche Bank predicts that the European Central Bank will begin cutting interest rates in December, possibly lowering rates by 25 basis points for two consecutive times, and even the possibility of a 50 basis point cut
Investment Insights - On September 26, the Swiss National Bank lowered its benchmark interest rate by 25 basis points to 1.00%, in line with market expectations, marking the third consecutive rate cut.
It forecasts that Switzerland's GDP will grow by around 1.5% in 2025 (previously expected to be 1.5%); the inflation rate in 2024 is projected to be 1.2% (previously forecasted at 1.3%), and the inflation rate in 2025 is expected to be 0.6% (previously forecasted at 1.1%).
The Swiss National Bank stated that the new inflation forecast is significantly lower than in June. The appreciation of the Swiss Franc, the decline in oil prices, and the expected reduction in electricity prices in January next year all contributed to this downward revision.
To ensure medium-term price stability, further policy rate cuts may be needed in the coming quarters. Intervention in the foreign exchange market when necessary.
Following the announcement, the US Dollar against the Swiss Franc (USD/CHF) fell by nearly 50 points in the short term, down 0.50% intraday to 0.8460. The Euro against the Swiss Franc (EUR/CHF) dropped by over 50 points in the short term, currently at 0.9455.
【Source: TradingView; 2024 Euro against Swiss Franc (EUR/CHF) trend】
The Swiss National Bank's consecutive rate cuts have given the market a dovish outlook. Deutsche Bank expects the European Central Bank to enter a faster rate-cutting cycle, with two consecutive 25 basis point cuts expected to start in December. The possibility of the European Central Bank cutting rates by 50 basis points in December cannot be ruled out
