Impact of the SNB rate cut: What we need to remember as Thomas Jordan bids farewell

The Swiss National Bank's (SNB) recent decision to cut interest rates reflects a difficult economic context, both in Switzerland and internationally. With the global economy slowing and domestic inflation falling, the Swiss institution is facing new economic and monetary challenges. This rate cut also marks an important milestone in the career of Thomas Jordan, who is stepping down from his role as leader of the SNB. Here are the main points to remember and some indications of how these changes may impact your financial decisions.

A rate cut justified by the economic context

The global economic slowdown and the significant reduction in inflation have led the SNB to ease its monetary policy. Inflation forecasts for the next two years have now been revised lower to around 0.5% per year. This positions Switzerland below the comfort zone of 1% to 2% inflation, exposing the country to new risks of deflation. If the Swiss franc continues to appreciate, this could exacerbate these threats, particularly in the event of external economic upheavals. Against this backdrop, the SNB is taking a cautious approach by continuing to ease policy.

Forecasts for the coming months

The downward trend in rates could well continue. A further cut of 0.25% is expected in December, potentially followed by another in the spring of 2025. However, the room for manoeuvre remains limited. The SNB is reluctant to return to negative rates, especially if the ECB and the Fed also follow a downward trajectory next year (as comparatively higher rates in Switzerland could put strong upward pressure on the franc). It is therefore likely that the SNB will return to intervention in the foreign exchange market in order to control the appreciation of the Swiss franc, particularly given the risky and unpredictable European environment.

Effects on Swiss markets and interest rates

The Swiss interest rate market is reacting positively, particularly for short maturities, while longer-term rates, such as those on Swiss government bonds, are already close to 0.4%. Mortgage rates, meanwhile, are set to fall, with a particularly marked effect on variable rates indexed to the SARON.

For equity investors, the fall in rates is good news, particularly for small and medium-sized Swiss companies, which are often penalised by a strong franc. Lower financing costs could provide them with a breath of fresh air. What's more, the steepening of the yield curve (short rates falling more sharply than long-term rates) should benefit financial institutions, and banks in particular.

Bespoke support from Piguet Galland

In this context of monetary adjustments, it is essential to be able to navigate these challenges with expertise and serenity. At Piguet Galland, we understand the impact that rate changes, and any other macroeconomic developments, can have on your financial plans, whether you need to refinance a mortgage, protect your assets against currency fluctuations, or optimise your investments.

We offer our clients a personalised approach that takes account not only of current trends but also of future scenarii, in order to secure their assets and make it easier for them to achieve their life projects. Our teams of experts are with you every step of the way, anticipating changes in monetary policy and helping to adjust your savings and investment strategies accordingly.