Swiss National Bank May Maintain a Cautious Stance on Interest Rate Decisions

The Swiss National Bank (SNB) has indicated that it is not committed to further lowering interest rates in December. Vice President Antoine Martin stated in an interview published on Monday that the central bank is not making “absolute commitments” regarding future monetary policy actions. This statement follows the SNB's decision to cut interest rates three times this year. Market expectations suggest a reduction of at least 25 basis points from the current rate of 1% at the upcoming meeting on December 12, 2024.

Martin's comments signal a shift from the bank's previous stance. The bank had indicated its readiness for another rate cut at its last meeting in September. Both Martin and President Martin Schlegel had discussed the possibility of further reducing rates, even going below zero. These discussions emerged after the SNB's success in controlling inflation, which fell to just 0.6% in October, marking the lowest level in three years.

However, Martin emphasized the importance of flexibility in the central bank's communication, noting that changing conditions could impact the SNB's decisions. He explained, "It's not beneficial for central banks to lock themselves into forward guidance, as there may be changes in conditions that could invalidate current communication between now and the next decision."

The Vice President also touched on the value of the Swiss franc, indicating that low inflation has been one of the factors behind its appreciation in recent years. The franc has also become a popular safe-haven choice among investors during uncertain times. Martin acknowledged that while the franc is expected to appreciate nominally over time due to inflation differentials with other countries, its real appreciation, excluding inflation, is limited. He added that the franc's rise this year is neither surprising nor problematic.

The SNB's upcoming interest rate decision will be closely monitored, and Martin's statements emphasize that the central bank's actions will be based on the current economic conditions assessed in December.