The Swiss National Bank (SNB) announced a 25 basis point interest rate cut on Thursday 26 September 2024, to 1.00% as was widely expected.
This marks the third consecutive interest rate cut by the central bank, which also indicated that further cuts may be necessary in the coming quarters to ensure price stability in the medium term.
Key points from the Swiss National Bank statement:
- The Swiss Central Bank reduced interest rates by 25 basis points to 1.0% effective September 27, 2024.
- Inflation expectations were lowered significantly from 1.3% in June for 2024 to 1.2%, and 2025 was revised down from 1.1% to 0.6%, all now within the price stability range.
- The Bank remains ready to intervene in foreign exchange markets when necessary
- Expectations of GDP growth of about 1% in 2024, rising to 1.5% in 2025
- Vulnerabilities in the mortgage and real estate markets have eased slightly but are still present
Link to the Swiss National Bank’s September press release
This result was broadly in line with market expectations, as discussed in the Babypips.com Event Guide released earlier this week. As noted in the Event Guide, the franc actually jumped higher when the statement was released, as shown in the chart below.
Market reactions
Overlay of the Swiss franc against major currencies Chart by TradingView
The Swiss franc initially strengthened after the SNB announcement, contrary to what might be expected after an interest rate cut.
This reaction may have been profit-taking when expectations of a 25 basis point cut were confirmed, but there is also an argument that those who had priced in a larger rate cut may have quickly unsold short positions in that event.
Whatever the situation for the bounce, as of this writing, the franc has turned into range-bound behavior during the rest of Thursday’s session, likely due to the market quickly turning to a heavy round of Fed rhetoric ahead of the US session. Along with top-tier US economic updates such as US GDP, unemployment claims and durable goods orders.