The majority of experts predict that Switzerland’s central bank will continue to loosen monetary policy on Thursday, possibly cutting its benchmark interest rate by an additional 0.25 percentage points.
With reductions of 0.25 percentage points in both March and June, the policy rate of the Swiss National Bank is currently 1.25 percent.
The industry is putting pressure on the SNB to control the strengthening of the Swiss franc when it makes its rate decision.
The watchmaking federation and the employers’ convention of the Swiss watch industry pushed the bank last week to intervene against the strong franc, which is placing additional strain on a vital industry already facing challenging times due to the decline in demand for high-end Swiss timepieces in China.
The national association for the engineering sector, Swissmem, also pushed for the SNB to step in in August, citing concerns that the franc’s sharp increase versus the euro since mid-July may stifle expectations for a rebound in the export-oriented industry.
One of the main safe havens for investors during difficult times is the Swiss franc, along with gold, the Japanese yen, and German bonds.
After bouncing back against the euro at the end of May, the franc quickly gained momentum and got close to its highs from late 2023 and early 2024.
The euro has lost about 3 percent of its value compared to the Swiss franc since mid-July.
Employers’ groups claim that because inflation has declined and is below the SNB’s two percent objective since June 2023, the bank has some leeway.
In August, it reverted to 1.1 percent on an annual basis.
With the strong franc supporting the SNB and relieving pressure on import product prices, which spiked following Russia’s invasion of Ukraine in 2022, inflation in Switzerland was swiftly brought under control.
