SNB Cuts 25bps to 0.25%: Swiss Franc Dynamics in Play

Market Expectations and Economist Views

A near 90% majority of economists surveyed by Reuters (28 out of 32) predict this 25bps cut, with only a few expecting no change. According to Karsten Junius, chief economist at J. Safra Sarasin, the additional cut will help support emerging growth momentum and anchor medium-term inflation closer to 1%. Nearly 60% of forecasters believe rates will remain at 0.25% by the end of the year, while a minority project further reductions to 0%; however, overall risks of negative rates are now deemed slim, as reiterated by Europe economist Adrian Prettejohn at Capital Economics.

Impact on the Swiss Franc and Broader Economy

Despite the favorable outlook for continued rate cuts, persistent weakness in the Swiss franc could trigger renewed price pressures in the near term, complicating the export environment. Meanwhile, rising optimism over eurozone growth—spurred by Germany’s anticipated infrastructure and defense spending boom—has bolstered the euro, which recently hit a more than six-month high against the franc. These dynamics underscore the delicate balance the SNB must maintain: supporting growth while ensuring the franc remains competitive without sparking inflation.

Conclusion

The SNB's anticipated 25bps rate cut, coupled with its commitment to low inflation and the current low risk of negative rates, positions Switzerland for steady economic growth, though the ongoing interplay between a weakening franc and a strengthening euro remains a critical challenge.