This news comes just after the Federal Reserve in the U.S. strongly hinted that at least several rate cuts are coming by this summer, most likely by June or July.
SNB is the first central bank to declare victory over inflation.
Said Karsten Junius, chief economist at J.Safra Sarasin, who had expected a rate cut, Reuters reported
The Swiss National Bank said in a press release:
The Swiss National Bank is lowering the SNB policy rate by 0.25 percentage points to 1.5%. The change applies from tomorrow, 22 March 2024. Banks’ sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold, and at 1.0% above this threshold. The SNB also remains willing to be active in the foreign exchange market as necessary.
The easing of monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective. For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. According to the new forecast, inflation is also likely to remain in this range over the next few years. With its decision, the SNB is taking into account the reduced inflationary pressure as well as the appreciation of the Swiss franc in real terms over the past year. The policy rate cut also supports economic activity.
Today’s easing thus ensures that monetary conditions remain appropriate. The SNB will continue to monitor the development of inflation closely, and will adjust its monetary policy again if necessary to ensure inflation remains within the range consistent with price stability over the medium term. Inflation has declined further since the beginning of the year, and stood at 1.2% in February. This decrease was attributable to lower goods inflation. Inflation is currently being driven above all by higher prices for domestic services.
The new conditional inflation forecast is significantly lower than that of December. In the short term, this is above all due to the fact that price momentum in the case of some categories of goods has slowed more quickly than had been expected in December. In the medium term, lower second-round effects are leading to a downward revision. Over the entire forecast horizon, the conditional inflation forecast is within the range of price stability (cf. chart). The forecast puts average annual inflation at 1.4% for 2024, 1.2% for 2025 and 1.1% for 2026 (cf. table). The forecast is based on the assumption that the SNB policy rate is 1.5% over the entire forecast horizon.
AUTHOR COMMENTARY
No, Switzerland has not declared “victory” over inflation.
If you have been following The WP for years now, I have been saying to ignore all the rhetoric from politicians and economists, with the claims that raising rates would stop inflation. We said then it would not and it was never the goal; and how could it go down when so much helicopter money was pumped into the economy around the world, especially when the economies were shutdown for several years? It was all about squeezing the consumer and middle class, tightening the availability of credit, and causing mass-layoffs; all of which we are seeing playing out right now.
As I said in my analysis of the Fed briefing yesterday, there are a lot of people saying the Fed was not going to lower rates, and a number of economists and commentators were even suggesting hikes. But, we must understand, it’s all game and data is irrelevant. The middle class is dead at this point and central banks have the people right where they want them, creating distinct classes of haves and have-nots in this neo-fascist-communist system we have now.
So, yes, the rate cuts have begun, and they have set the tone for other central banks moving forward. Anyone saying otherwise is out of touch and are just looking to be “bold” for clout.
By the time some banks start failing this year, I suspect, this will be when the Fed starts to cut rates. It’ll act as a great cover story.
[12] In thee have they taken gifts to shed blood; thou hast taken usury and increase, and thou hast greedily gained of thy neighbours by extortion, and hast forgotten me, saith the Lord GOD. [13] Behold, therefore I have smitten mine hand at thy dishonest gain which thou hast made, and at thy blood which hath been in the midst of thee. [14] Can thine heart endure, or can thine hands be strong, in the days that I shall deal with thee? I the LORD have spoken it, and will do it. Ezekiel 22:12-14
[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).
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