Rate Cuts in Euroland and Switzerland – Currency Thoughts
Rate Cuts in Euroland and Switzerland
December 12, 2024
A 25-basis point cut in Euroland’s key interest rates including the deposit rate to 3.0% had been widely expected by investors. The European Central Bank statement includes updated macroeconomic forecasts that lower projected GDP growth to 0.7% this year and 1.1% next year as well as total projected CPI inflation to 2.4% in 2024 and 2.1% in 2025. Today’s move was the fourth 25-bp reduction since June and was deemed appropriate in light of “the updated assessment of the inflation outlook, the dynamics of underlying inflation and the greater strength of monetary policy transmission.”
A halving of the Swiss National Bank’s key interest rate to 0.5% today was the largest rate cut there since 50-bp cut in January 2015. In taking this action, officials repeated their warning to intervene directly in foreign exchange markets against franc overvaluation when and as deemed necessary. The revised projected future path of CPI inflation lies somewhat lower than forecasts made in September for the period through the third quarter of 2025 and projects year-average inflation rates below 1.0% in both 2025 and 2026. The statement ends with the caveat that “the forecast for Switzerland, as for the global economy, is subject to significant uncertainty. Developments abroad represent the main risk.”
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: European Central Bank, Swiss National Bank
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