The Swiss National Bank (SNB), which initiated the global trend of monetary easing in March, made its third rate cut on Thursday, lowering its policy rate by 25 basis points to 1%. Switzerland has largely sidestepped the inflation surge seen in much of the developed world, with consumer prices rising by just 1.1% in August, down from 1.3% in July. Inflation has remained within the SNB's target range of 0% to 2% for the last 15 months.
The central bank cautioned that further rate cuts "may be necessary in the coming quarters" to prevent inflation from slowing too much. The rising strength of the Swiss franc against both the euro and the U.S. dollar since the SNB’s previous cut in June has contributed to downward pressure on inflation, while recent business survey data have pointed to economic weakness. Market expectations now point to two additional 25-basis-point cuts from the SNB.
Despite these developments, analysts at UBS believe the SNB is nearing the end of its rate-cutting cycle, having moved early to reduce rates. UBS contrast this with the global trend toward lower interest rates that is expected to continue.
***
The Swissy gained a little after the cut, some pointing to the expectations of a 50bp cut that were priced as a coin toss going to the meeting, as reasoning:
