Anticipated economic growth around 1% for the remainder of 2024 and around 1.5% in 2025
Decision met with positive reactions from European and Swiss stock markets
SNB projects slight increases in unemployment and small declines in production capacity utilization over the medium term
Swiss National Bank cuts interest rates to 1.25%
Switzerland now has the second-lowest interest rate among G10 democracies
Switzerland's central bank, the Swiss National Bank (SNB), made a second interest rate cut of 25 basis points to 1.25% on June 20, 2024. This decision was in line with expectations and follows the first rate cut back in late March. With this move, Switzerland now has the second-lowest interest rate among G10 democracies, only behind Japan.
The SNB's latest projections indicate that economic growth is anticipated to be around 1% for the remainder of 2024 and around 1.5% in 2025. The Swiss economy is expected to experience slight increases in unemployment and small declines in production capacity utilization over the medium term.
The SNB's decision comes as major economies diverge on monetary policy easing, with some central banks considering further rate cuts. The European Central Bank followed Switzerland's lead earlier this month, while questions remain about whether the Swiss National Bank will proceed with a third rate cut in 2024.
The interest rate cut was met with positive reactions from European and Swiss stock markets. Zurich's benchmark SMI index added 0.6%, and France's Cac 40 also gained following a successful government bond auction.
Despite the SNB's inflation forecast suggesting that there may be more restrictiveness to be squeezed out this year, some analysts believe that further rate cuts are unlikely due to current inflationary pressures. The Swiss franc remains vulnerable in this scenario.
