MNI SNB WATCH: Cuts, Hints At More As Lowers Inflation Outlook
MNI (LONDON) - The Swiss National Bank cut its policy rate by 0.25 percentage points to 1.0% on Thursday, as anticipated, with the threshold-adjusted sight deposit rate cut to 0.5%.
SNB policymakers also stressed their willingness to be active in the foreign exchange market as necessary, and hinted at further rate cuts in coming quarters. (See MNI SNB WATCH: Rate Cut and FX Intervention As Inflation Falls )
"Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term," the bank's policy statement noted.
According to the SNB, the rate cut reflected both the strength of the franc and the continued decline of inflationary pressures throughout the domestic economy,
Sight deposits held at the SNB will be remunerated at the policy rate up to a certain threshold,and at 0.5% above this threshold following the latest policy move.
INFLATION OUTLOOK
The inflation outlook has been lowered across the board, with the SNB's new forecast showing price growth within the range of stability over the whole horizon. It puts average annual inflation at 1.2% for 2024, 0.6% for 2025 and 0.7% for 2026.
That outlook was based on a constant policy rate of 1% over the entire forecast horizon.
"Without today’s rate cut, the conditional inflation forecast would have been even lower," said outgoing President Thomas Jordan, who steps down from his role next week, to be replaced by Martin Schlegel.
GROWTH CONCERNS
While the SNB was fairly upbeat about the recent performance of the economy, there were still risks on the horizon, with both the domestic and global outlook "subject to significant uncertainty, with developments abroad representing the main risk."
The SNB noted that momentum in the mortgage and real estate markets in recent quarters has been weaker than in previous years, and that, although "vulnerabilities in these markets have receded slightly", they still exist.