By Indradip Ghosh

BENGALURU – The Swiss National Bank (SNB) is expected to cut its benchmark interest rate by 25 basis points on Thursday, according to a majority of economists surveyed by Reuters. This would mark the third consecutive meeting of rate cuts. A slight majority of economists predict that the SNB will hold rates steady in December.

The central bank has raised interest rates more gradually compared to major peers since the pandemic began, commencing reductions in March.

Swiss inflation fell to 1.1% last month, the lowest in the G10 economies, and it aligns with the SNB’s desired range of 0-2%.

Despite these measures, the Swiss franc has appreciated over 5% against the euro since late May.

In a survey conducted from September 18-23, 30 of 32 economists predicted the SNB would lower its main interest rate to 1.00%. One economist anticipated a larger cut of 50 basis points, while another expected no change.

Analysts suggest that, unlike the U.S. Federal Reserve’s recent 50 basis-point cut, a more significant reduction is less likely due to limited policy flexibility.

Karsten Junius, chief economist at J. Safra Sarasin, stated, “The SNB will almost certainly cut its policy rate by 25bp to 1.00% this coming Thursday.” He also indicated that aggressive cuts might create an impression of panic.

A 55% majority of economists expect the SNB to maintain current rates in December, though there are predictions for further reductions in upcoming months that would see rates drop to 0.75% by March.

If the anticipated decision occurs, the SNB will have reduced rates cumulatively by 75 basis points this year, matching expectations for the European Central Bank (ECB), which also cut rates recently.

The strong Swiss franc is a concern for policymakers, as it impacts Swiss industry. As SNB Chairman Thomas Jordan prepares to step down, it may lead to further rate cuts or foreign exchange interventions to control the franc’s strength.

Economists also forecast that Swiss inflation will average 1.2% this year, easing to 1.0% in 2025, which is higher than government projections.

(Other stories from the Reuters global economic poll)