MNI SNB WATCH: SNB Cuts 50BP With Room To Manoeuvre
MNI (LONDON) - The SNB cut its key policy rate by 50 basis points to 0.5%, with the rate on excess sight deposits cut to 0%, the Board announced on Thursday, adding that it remains willing to be active in the foreign exchange market as necessary. (See MNI SNB WATCH: To Cut and Signal More As Inflation Undershoots )
President Martin Schlegel, noted that markets were pricing in a terminal rate of 0% some time in 2025, but avoided making any comment as to the SNB's rate path or whether it was clear rates would fall further. Monetary conditions were "appropriate,” he said, speaking in his first press conference at the head of the Bank, adding that there was room for further policy manoeuvring, but without directly addressing the possibility of a future move back to negative interest rates.
NOT BEHIND CURVE
Policymakers want to keep policy appropriate, without getting behind the curve.
"We want to move soon enough to prevent having to overreact after,” he said.
The rate cut came as inflation fell over the last quarter, with the annual rate below the September projection. Without Thursday’s policy move, the projection would be "lower still", the statement said. However, Schlegel said the SNB did not see inflation turning negative on a quarterly basis, despite cutting its 2025 forecast to just 0.3%.
While it was possible that monthly measures of inflation could fall to negative levels, the Board would look through "temporary deviations" from target levels, Schlegel said.
NO RATE PATH
Without committing to a future rate cut path, the SNB said it was willing to act as necessary to keep inflation consistent with price stability.
"The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term," the statement said.