MNI SNB WATCH: Cuts, But No Clear Guidance On Next Move
MNI (LONDON) - The Swiss National Bank cut its benchmark Policy Rate by 25 basis points to 0.25% on Thursday, saying that this would ensure that "monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation."
Banks’ sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold, and at 0% above this threshold. The SNB said it remains willing to act in the foreign exchange market as necessary. (See MNI SNB WATCH: Swiss Set To Cut, But End Point In Sight)
Chairman Martin Schlegel told reporters the SNB had eased monetary policy "considerably" over recent quarters, which has helped stabilise the inflation outlook over the medium term. While not committing to any further action, he said policymakers would "continue to monitor the situation closely and adjust our monetary policy if necessary, to ensure that monetary conditions remain appropriate."
INFLATION OUTLOOK
The SNB's updated inflation outlook was hardly changed from December, with average annual inflation at 0.4% for 2025, 0.8% for 2026 and 0.8% for 2027. The forecast is based on the assumption that the SNB policy rate is 0.25% over the entire forecast horizon.
According to Schlegel, the January decline in prices was attributable particularly to a drop in electricity prices. Overall, inflation is still being driven mainly by domestic services.
"Without today’s rate cut, the forecast would have been lower in the medium term," he said, noting that the forecast is within the range of price stability over its horizon.
"Against the backdrop of increased trade and geopolitical uncertainties worldwide, developments abroad continue to represent the main risk,” the SNB said.
"Increasing trade barriers could lead to weaker global economic development. At the same time, a more expansionary fiscal policy in Europe could provide stimulus to the economy in the medium term, " Vice Chairman Antoine Martin said.