SNB took a decisive step by lowering its policy rate by 50 basis points to 0.50%. In its accompanying statement, the central bank highlighted that underlying inflationary pressures have “decreased again” this quarter, warranting the larger-than-expected rate cut. SNB reiterated its commitment to “monitor the situation closely” and stated that it would “adjust its monetary policy if necessary.”
The latest conditional inflation forecasts reflect a significantly subdued outlook, even with interest rate down from 1.00% to 0.50%.
For 2025, inflation is now projected at just 0.3%, a notable downgrade from the 0.6% forecast in September. However, the 2026 outlook saw a slight upward revision to 0.8%, from 0.7% previously.
Looking at some details, inflation is expected to decline sharply from 0.7% in Q4 2024 to a low of 0.2% in Q2 2025, before gradually recovering to 0.8% in 2026 and 0.7% in 2027. These figures underscore the SNB’s view of persistent deflationary risks, necessitating its proactive policy stance.
In terms of economic growth, SNB estimates GDP growth for 2024 to come in at around 1%, with a modest pickup to 1-1.5% expected in 2025. Despite this improvement, challenges remain, including slightly rising unemployment and declining utilization of production capacity.
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