The Swiss central bank, first major Western central bank to lower its rates – 03/21/2024 at 4:44 p.m.


The president of the Swiss National Bank (SNB), Thomas Jordan, during a conference in Zurich on March 21, 2024 (AFP / Fabrice COFFRINI)

The president of the Swiss National Bank (SNB), Thomas Jordan, during a conference in Zurich on March 21, 2024 (AFP / Fabrice COFFRINI)

The Swiss National Bank (SNB) decided on Thursday to lower its key rate, becoming the first of the major Western central banks to change its monetary policy, since the rapid turn of the screw launched almost two years ago to fight against inflation .

The Bank of England (BoE) for its part unsurprisingly maintained its interest rate but opened the way to an upcoming monetary easing.

The Bank of Norway left its rate at 4.5%, suggesting a first reduction during the autumn.

Price developments in Switzerland are much more reasonable than elsewhere.

The SNB thus justified the reduction of a quarter of a point in its reference interest rate, to bring it to 1.5%, by its “effective” fight against inflation.

This decision surprised most analysts who were leaning towards a rate cut in June.

The SNB “thus declares victory over inflation”, reacted Fredy Hasenmaile, chief economist of the Raiffeisen bank, in a market commentary.

For the moment the other major Western central banks have preferred to wait as they continue to fight against inflation which has soared in 2022 in particular because of the effects of the war led by Russia in Ukraine.

– Federal Reserve Reserved –

The American Federal Reserve (Fed) on Wednesday kept its rates unchanged, which remain at the highest level in more than twenty years, but it maintains the plan to reduce the cost of credit three times this year.

Overnight rates remain between 5.25% and 5.50%, the central bank announced in a press release, after a unanimous decision by the members of the Monetary Committee (FOMC).

In the United Kingdom, the BoE also opted for the status quo on Thursday and kept its rate at 5.25%, the highest since 2008. British inflation fell to 3.4% year-on-year in February, at the most low since September 2021 and in clear decline since its peak of more than 11% at the end of 2022.

However, it remains the highest in the G7 and well above the BoE's 2% target.

The Bank of England, November 2, 2022 in London (AFP / ISABEL INFANTES)

The Bank of England, November 2, 2022 in London (AFP / ISABEL INFANTES)

“We are not yet at the point where we can lower interest rates, but things are moving in the right direction,” said BoE Governor Andrew Bailey.

“In recent weeks, we have seen more encouraging signs that inflation is falling,” he said, adding that he “needs to be sure” that it goes down to 2% “and stays there.”

The British economy, which fell into recession at the end of 2023, regained momentum in January with growth of 0.2%. Analysts anticipate a first BoE rate cut in June.

– Swiss industry smiles –

In Switzerland, this is the first time since the tightening began in 2022 that the SNB has relaxed its monetary policy.

She took into account “the reduction in inflationary pressure”, she said in a press release.

Since June, inflation in Switzerland has fallen below the 2% mark targeted by the monetary institution and fell to 1.2% in February, leading the SNB to revise its forecast downward for 2024 to 1.4%. , and 1.2% for 2025.

It also increased its growth forecast for the Swiss economy to 1%, compared to 0.5% to 1% previously.

The Swiss National Bank (SNB), photo taken on March 21, 2024 (AFP / Fabrice COFFRINI)

The Swiss National Bank (SNB), photo taken on March 21, 2024 (AFP / Fabrice COFFRINI)

By making credit cheaper, the SNB responded to calls from Swiss exporting companies.

The goal was not to be the first or the last central bank but to make a decision at the “right time for Switzerland”, clarified its president, Thomas Jordan, during a conference in Zurich.

The industry in particular is affected by a slowdown in orders in the face of concerns about the global economy but also interest rates which are making investments more expensive.

Exporting companies are also penalized by the strength of the Swiss franc, at a level that remains high compared to the dollar and the euro.

Given the less firm tone of the SNB “and inflation likely to be lower than its updated forecasts”, it is likely that the monetary institution will make further rate reductions this year, further estimates Adrian Prettejohn, analyst at Capital Economics .

In the wake of the SNB's announcement, the Swiss franc lost ground against the dollar and the euro. The pound reacted moderately to the BoE's decision, and lost some ground against the greenback.

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