Switzerland’s Central Bank Cuts Interest Rates Again

Swiss National Bank Cuts Interest Rates for the Third Time

The Swiss National Bank (SNB) has announced a further reduction in interest rates, marking its third cut this year.
On September 26, the bank lowered the cost of borrowing by 25 basis points, bringing the reference rate down to 1.00%.
This decision aligns with recent actions taken by both the European Central Bank (ECB) and the Federal Reserve, showcasing a collective approach to easing monetary policies amid declining inflation rates.

This latest adjustment represents the lowest interest rates have been since the beginning of 2023, as analysts had anticipated.
Following the announcement, the Swiss franc strengthened against major currencies.
Currently, the US dollar and the euro depreciated by 0.31% and 0.13%, respectively, against the Swiss currency.

Reasons Behind the SNB Rate Adjustment

The decision to lower rates to 1.0% reflects the SNB’s ongoing commitment to managing inflation, which dropped to 1.1% in August.
Throughout the last 15 months, inflation has remained within the bank’s target range of 0-2%.
President Thomas Jordan emphasized that further rate cuts might be necessary to ensure medium-term price stability, given the significant decrease in inflationary pressures within the country.

Furthermore, the SNB has revised downward its inflation forecasts for 2025 and 2026, projecting only a 0.6% increase in consumer prices by the second quarter of 2027.
Several analysts anticipate that the SNB may implement another rate cut by December.

Impact of the Swiss Franc’s Strength

Another crucial aspect of the SNB’s decision was the appreciation of the Swiss franc over recent months, which had climbed to a nine-year high against the euro in early August.
This strengthening has posed challenges for Swiss exporters, a concern that the bank acknowledged in its statement regarding the rate cut.

The SNB has effectively positioned itself as a leader among central banks, having successfully battled inflation and made strategic rate cuts in March and June.
President Jordan has recognized the complications the rising franc presents for exporters, which heightens expectations that continued reductions in interest rates may follow to potentially weaken the currency’s status as a safe haven.

For more insights, read about Why the ECB Might Cut Rates This October.
Additionally, learn about Why Carry Traders Are Betting on the Swiss Franc.