The Swiss National Bank (SNB) will publish its interest rate decision on Thursday, causing speculation about the size of the potential cut. Market analysts are widely projecting a reduction in rates, which could be the third one this year, but uncertainty remains about whether the SNB will opt for a 0.25 or a more significant 0.50 percentage point cut.
Some experts currently anticipate a 0.25 percentage point reduction, following the trend of modest adjustments seen earlier this year. However, some analysts point to the Federal Reserve's recent decision and the strong performance of the Swiss franc as reasons why the SNB could consider a larger 0.50 percentage point cut.
The Swiss franc has rallied significantly over the past year, gaining some 1.8% against the euro and around 7.5% against the US dollar, according to Baha Wealth data. In early August, the franc soared to a five-month high against the dollar, increasing pressure on the SNB to take stronger action to prevent excessive appreciation, which could harm Swiss exports and economic growth.
With inflation falling to 1.1% in August and staying below 2% since May 2023, the SNB may feel confident that inflationary pressures are under control, opening the door for another rate cut. The Swiss economy has also shown resilience, growing by 0.7% in the second quarter of 2024 after contracting in Q2 2023. This marks four consecutive quarters of positive growth.
The SNB has already delivered two consecutive 25 basis point cuts, one in March and another in June. During his June speech, outgoing SNB President Thomas Jordan acknowledged the easing of inflationary pressures, stating that "the underlying inflationary pressure has decreased further compared with the previous quarter." He emphasized that the SNB's policy rate adjustment would help maintain "appropriate monetary conditions."
As investors await Thursday’s decision, attention is also turning to the upcoming leadership change. Martin Schlegel, who takes over as SNB president on October 1, will face the task of managing future monetary policy moves.
