The Swiss National Bank (SNB) significantly reduced its foreign exchange interventions in 2024, purchasing 1.2 billion Swiss francs in foreign currency. This marks a sharp contrast to 2023, when the central bank sold 132.9 billion francs to strengthen the Swiss franc and counteract imported inflation.
In December 2023, the SNB announced a shift in its strategy, stating that it would no longer focus on foreign currency sales. This policy adjustment proved effective, with inflation stabilizing at 1.1% in 2024 - well within the central bank’s target range of 0-2%. The SNB is set to announce its next monetary policy decision on Thursday, with economists widely expecting a rate cut.
A Reuters poll conducted between March 12-17 found that 28 out of 32 economists predict the SNB will lower its key interest rate by 25 basis points to 0.25% on March 20, keeping it at that level until at least 2026. Inflation, which dropped to a near four-year low of 0.3% in February, has created room for further monetary easing. However, concerns remain over the potential weakening of the Swiss franc, which could reignite price pressures.
Despite the expected rate cut, the risk of a return to negative interest rates remains low. Nearly 60% of economists in the survey believe the SNB will keep rates at 0.25% through year-end, while others predict a potential drop to 0%. The Swiss economy is forecast to grow by 1.3% in 2024 and 1.5% in 2025, indicating stable conditions.
The ongoing U.S.-led trade tensions, which Switzerland has largely avoided, could influence inflation, though the impact remains uncertain. Meanwhile, European fiscal policies, including higher German bond yields, may allow the SNB to maintain a larger rate differential without further cuts. Markets currently anticipate two additional rate reductions by the European Central Bank this year.