The decision of the Swiss National Bank
In December 2024, the Swiss National Bank (SNB) made a significant decision by reducing its key monetary policy rate by 50 basis points, bringing it to 0.5%. This cut exceeded market expectations, which predicted a smaller decrease of 25 basis points. This is the fourth consecutive reduction and the most marked since January 2015, bringing borrowing costs back to their lowest levels since
November 2022.
Inflation and economic growth
The SNB’s decision was influenced by the drop in inflation, which fell from 1.1% in August to 0.7% in November. This decline was driven by a reduction in costs in the domestic services, oil and food sectors. The forecasts indicate that average inflation will be 1.1% in 2024, falling further to 0.3% in 2025 and to 0.8% in 2026, thus remaining within the SNB’s
target range.
GDP prospects and economic risks
Swiss GDP is estimated to grow by around 1% this year, with a slight improvement expected between 1% and 1.5% in 2025, supported by recent rate cuts. However, rising unemployment, slower production and global uncertainties, such as geopolitical tensions and unclear political directions abroad, pose significant risks to Switzerland’s economic prospects. Analysts warn that, although reducing rates may stimulate growth, it is essential to closely monitor these external factors that could negatively affect the
economy.
Impact on financial markets
The financial market reacted positively to the news of the reduction in rates, with the Tokyo Stock Exchange closing higher, supported by data on inflation in the United States and the weakening of the yen. However, investors remain cautious and uncertain about the Bank of Japan’s (BoJ) future moves, highlighting the need for a careful analysis of global economic dynamics
.