**As seen in Risk In The Week report 03/16/25, get access now! cablefxm.co.uk
Back in December, the SNB lowered its policy interest rate
by 50 basis points, from 1.0% to 0.5%. This was a
significant move, marking the largest rate cut in nearly a
decade, and it was driven by several key factors discussed
during the meeting. The central bank noted that the
inflationary pressure in Switzerland had weakened more than
expected, with inflation at 0.7% in November 2024, well
within the bank’s 0-2% target range for price stability. The
SNB also revised its inflation forecast downward, projecting
an average of just 0.3% for 2025, indicating a notably lower
expectation for price increases compared to prior estimates.
This low inflation environment, combined with the
appreciation of the Swiss franc, was a major justification for
the rate cut, as the stronger franc was seen as reducing
inflationary pressure further while posing challenges to Swiss
exporters.
Strategists at UBS point to a last step from the SNB to lower
rates as their base case scenario, this would leave the policy
rate at 0.25bps. UBS sees Switzerland GDP growth
expanding 1.5% in 2025, faster than the prior year, on euro
demand improvement. On inflation, UBS warned that a
further appreciation of the Swiss franc could push prices
below the SNB's mandate band and this would increase the
odds of NIRP.
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