Contrary to consensus expectations of no policy change, the Swiss National Bank (SNB) delivered another surprise interest rate cut of 25 basis points in this week's announcement.
This follows a 0.25% interest rate cut in March, which was also mostly unexpected. In its June statement, the Swiss National Bank also noted this “Ready to be active in the foreign exchange market if necessary.”
Link to the SNB's official statement for June 2024
Policymakers estimated that overall inflation in Switzerland was mainly driven by higher domestic price pressures, but inflation abroad was likely to ease in the coming quarters. The central bank also expects only moderate global growth, which remains vulnerable to “significant risks” and a “renewed increase in geopolitical tensions.”
During the press conference, SNB President Jordan acknowledged the depreciation of the franc in the January-May period, but warned that the value of the currency had risen again in recent weeks, contributing to uncertainty about inflation expectations.
Link to the introductory remarks of the Swiss National Bank's news conference
Market reactions
Swiss Franc against major currencies: 5 minutes
Overlay of the Swiss franc against major currencies Chart by TradingView
Franc pairs were in consolidation mode with a slight upward bias ahead of the SNB's monetary policy decision, as the central bank was widely expected to keep interest rates unchanged.
For this reason, the easing decision turned out to be shocking, leading to a sharp decline for the Swiss currency across the board.
Another wave of declines followed during the SNB press conference, where the SNB President highlighted the currency's appreciation in recent weeks due to political uncertainty in Europe, making traders wary of potential intervention moves.
Thus, the franc continued its decline in the next trading session, falling to its lowest level at 0.87% against the US dollar while reducing its losses against the Japanese yen at 0.29%.
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