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Monetary Policy Outlook December 2024

Martin Schlegel starts as the new SNB President with a clear signal: a 50 basis point cut in the key interest rate. The franc has reacted to this, but the strength of the currency is unlikely to be broken in the long term. Should the pressure on the franc continue despite lower interest rates, the SNB may be forced to initiate systematic foreign exchange market interventions. In theory, it would first have to lower interest rates further towards the effective lower bound. This raises the question of whether today’s interest rate move will remain a one-off intervention or whether the SNB will maintain its pace and cut the key rate to 0% as early as March.

Monetary Policy Outlook November 2024

Disinflation in Switzerland increases the likelihood of negative inflation rates in the coming year, which could force the SNB to cut interest rates further next year as well. Market rates already suggest a SARON rate of 0.10% in the second half of 2025. In the US, the robust economy and stubborn inflation could prompt the Fed to hold off on raising rates, while rising wages are not expected to prevent the ECB from cutting rates for a fourth time.

Finanzierungsrisiken von gemeinnützigen Wohnbauträgern (in German)

After the three interest rate cuts by the SNB and the significant decline in market interest rates, a further increase in the mortgage reference rate is unlikely. However, a decrease is not necessarily to be expected either. It is more likely that the reference rate will remain stable or fluctuate between 1.50% and 1.75% due to the underlying average interest rate and the calculation method. What are the likely implications for non-profit housing developers?

Monetary Policy Outlook October 2024

The sharp disinflation in Switzerland should prompt the SNB to cut its key interest rate again at its December meeting. Further steps next year seem likely, as despite several cuts, the SNB remains behind market expectations. Internationally, the Fed is expected to cut its rate by only 25bps next week – while keeping its approach for the last meeting of the year open. The ECB, on the other hand, is expected to overlook a more aggressive approach of 50bps despite a sharp drop in inflation and a weak economy.

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