The Swiss National Bank (SNB) lowered its key policy rate by 25 basis points to 1.00% on Thursday, marking its third consecutive monetary easing step of 2024. The quarterly decision coincided with the farewell assessment of Governing Board Chairman Thomas Jordan, who is stepping down after leading the Swiss central bank through twelve turbulent years marked by negative interest rates, massive currency interventions, and the historic emergency rescue of Credit Suisse.
In its monetary policy statement, the central bank underscored that inflationary pressure in Switzerland had dropped markedly over the summer months. Annual consumer inflation stood at just 1.1% in August, comfortably within the SNB's price stability band of 0% to 2%. Officials projected inflation to decline further to 0.6% in 2025, opening ample room for monetary accommodation.
Third Consecutive Rate Reduction Confronts Disinflation and Currency Pressure
A persistent catalyst behind the easing cycle has been the formidable strength of the Swiss franc, which surged to multi-year highs against both the euro and the US dollar. Safe-haven capital inflows driven by global economic uncertainties and European political volatility have raised production costs for Swiss export champions, from precision machinery makers to luxury watchmakers and pharmaceutical conglomerates.
The SNB affirmed its willingness to intervene actively in foreign exchange markets if necessary to prevent disorderly currency appreciation from depressing domestic consumer prices into outright deflation. Economists noted that the rate reduction narrows the interest rate differential with the European Central Bank and US Federal Reserve, helping to alleviate speculative buying pressures on the franc.
“Inflationary pressure in Switzerland has decreased significantly compared to the previous quarter. Our rate cut accounts for this easing and ensures monetary conditions remain appropriate.”
Thomas Jordan's Legacy and the Transition to Martin Schlegel
The meeting marked an emotional milestone for Thomas Jordan, who joined the SNB Governing Board in 2007 and assumed the chairmanship in 2012. Jordan navigated Switzerland through the unpegging of the franc from the euro in 2015, sustained nearly eight years of negative interest rates, and orchestrated the state-backed takeover of Credit Suisse by UBS in March 2023, preserving national and global financial stability.
Vice Chairman Martin Schlegel is set to take over the chairmanship on October 1, inheriting a stable monetary framework but facing ongoing challenges from sluggish European demand and volatile global capital flows. Market participants widely anticipate that the SNB could implement an additional 25-basis-point cut in December to bring the benchmark borrowing rate to 0.75%.
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