| Ramzi Chamat
The Swiss National Bank (SNB) left its mark at the end of 2023 with an unexpected decision: maintaining its key rate at 1.75%. This measure, surprising for markets and analysts, could signal the peak of the current cycle of monetary tightening. This cautious choice, in the face of a fluctuating global economic context, underlines the measured strategy of the SNB. With contained inflation and mixed forecasts for 2024, the SNB demonstrates its ability to balance support for growth and control of inflation, while remaining responsive to overall economic dynamics. This thoughtful approach is essential for Switzerland's economic stability, especially in an uncertain environment.
At the end of 2023, the Swiss National Bank (SNB) surprised the markets and analysts by maintaining its key rate at 1.75%, while many expected an increase of 25 basis points. The move suggests the 1.75% rate could be the high point of this cycle of monetary tightening, reflecting a cautious approach to an ever-changing global economic environment.
Inflation, a key factor in the SNB's monetary policy, remains at a moderate level. In August, consumer price index (CPI) inflation stood at 1.6%, remaining well below the SNB's target of less than 2%. This control of inflation is largely attributable to the effective monetary policy of the SNB, which used its massive international reserves and policy rate to support the Swiss franc (CHF), thereby limiting imported inflation.
For 2024, forecasts are mixed. Although inflation is expected to pick up slightly, with CPI forecast to peak around 2.25%, the SNB could consider a moderate hike of 25 basis points if the inflation exceeds this estimate. However, the prevailing outlook suggests a rate cut to 1.50% towards the end of 2024, indicating a desire by the SNB to remain vigilant but flexible in the face of inflationary pressures.
This decision by the SNB to maintain rates reflects a cautious and measured approach. In December 2023, at the next meeting of the SNB's monetary policy committee, it is likely that the bank will maintain its current position, especially if the rate hike cycles of the main central banks have ended. The Swiss franc is expected to remain stable, supported by continued purchases of CHF by the SNB, as well as defensive flows in the event of a slowdown in global growth.
In summary, the SNB is cautiously navigating an uncertain economic environment, balancing the need to support economic growth while controlling inflation. Swiss monetary policy, although prudent, remains flexible and responsive to global economic developments, playing a crucial role in stabilizing the Swiss economy.
Source: BNS / UBS / ING
