The Swiss National Bank (SNB) announced a 25 basis point cut to its policy rate on Thursday, September 26, 2024, lowering it to 1.00% as widely expected.
This marks the third consecutive rate reduction by the central bank, which also indicated that further cuts may be necessary in the coming quarters to ensure medium-term price stability.
Key Points from the Swiss National Bank statement:
- The SNB lowered the policy rate by 25 basis points to 1.0%, effective September 27, 2024
- Their inflation forecast was significantly reduced from 1.3% in June for 2024 to 1.2%, 2025 was revised lower from 1.1% to 0.6%, all now within the range of price stability
- The bank remains willing to intervene in foreign exchange markets as necessary
- GDP growth forecast at around 1% for 2024, rising to 1.5% for 2025
- Vulnerabilities in mortgage and real estate markets have receded slightly but still exist
Link to the September Swiss National Bank statement press release
This outcome was pretty much inline with market expectations, as discussed in the Babypips.com Event Guide released earlier this week. Also mentioned in the Event Guide, the franc actually jumped higher on the statement release, as seen in the chart below.
Market Reactions
Overlay of CHF vs. Major Currencies Chart by TradingView
The Swiss franc initially strengthened following the SNB’s announcement, contrary to what might be expected after an interest rate cut.
This reaction may have been profit taking when expectations of a 25 bps cut was confirmed, but there’s also an argument that those who priced in an even larger rate reduction may have quickly taken off shorts on the event.
Whatever the case may be for the bounce, as of this writing, the franc shifted into choppy range bound behavior through the rest of the Thursday session, likely due to the market quickly shifting to a heavy round of Fed speak ahead in the U.S. session, along with top tier U.S. economic updates like U.S. GDP, unemployment claims and durable goods orders.