Switzerland surprise cuts rates and declares victory over inflation

The central banks’ calendar does not stop. After the Fed meeting, this Thursday The Swiss National Bank (SNB) has come to the forethat has unexpectedly decided to cut rates by 25 points basics. The monetary institution has thus left the price of money at 1.5% from the previous 1.75%. The market consensus expected that there would be no movements for now, however, the SNB has shown complete optimism in the defeat of inflation that has led it to move now.

According to the macroeconomic forecasts updated by the central bank now They expect an average inflation of 1.4% for this year (compared to the previous 1.9%) and 1.2% by 2025. “This flexibility has been possible thanks to the fight against inflation, which has been effective. For months the CPI has already been below 2% and the SNB estimates that it is already in line with price stability, a range in which we expect it to remain in the coming years.”

In addition, the central bank has opened the door wide to more cuts. In that sense, the market hopes that this can occur as soon as June (the next meeting). Although everything depends on there being no surprises regarding inflation that is at 1.2% in the month of February. In that sense, the institution has committed to adjusting the ‘price of money’ if new inflationary pressures arrive that compromise price stability.

For its part, the central bank wanted to make it clear that it will not hesitate to maintain the stability of the Swiss franc, which may be affected after the shift towards flexibility. In fact, in the institution’s statement they specify in this regard that “the BNS is willing to actively participate in the foreign exchange market as necessary”. In any case, after learning of the decision, its currency fell 0.87% against the euro and has already accumulated a decline of 1.8% in the month and 4.4% from its annual highs.

This is the first meeting of the Swiss institution after its president, Thomas Jordan, announced his departure on March 1 and could put the direction of the institution after the turn towards cuts on track before his departure in September. “The moderate level of interest rates (there was no need for increases as aggressive as those of the ECB and the Fed) means that there will be no aggressive easing throughout the year,” they explain from Raiffeisen, which predicts a calm schedule of cuts from now on.

But the Swiss was not the only central bank that has made announcements today. Norges Bank has proclaimed that maintains its reference rate unchanged at 4.5% for the second consecutive meeting. This was the decision that the market expected given the resistance of its economy and expected inflation, which is at 4.1% on an annual average after standing at 4.5% in February.