MNI SNB WATCH: Easing Underlying Inflation Allows 25Bp Cut

The Swiss National Bank has cut its policy rate by 25 basis points to 1.25%, as underlying inflation pressures decreased from the previous quarter, it said on Thursday.

"Taking into account today’s policy rate cut, the new conditional inflation forecast is similar to that of March. Over the longer term, it is slightly below the previous forecast. This reflects somewhat lower second-round effects," the SNB said in a statement following the cut, which had been seen as the most probable outcome for the meeting, with a lower probability for a hold following a slight pick up in inflation. (See MNI INTERVIEW: SNB Cut Or Hold Decision "50:50" - Wyplosz).

The SNB forecast average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, assuming that the policy rate is 1.25% over the entire forecast horizon.

The Bank remains "willing to be active in the foreign exchange market as necessary", it said. 

Growth is likely to remain moderate in Switzerland in the coming quarters, with GDP growth of around 1% this year, though the outlook is subject to significant uncertainty.