SNB lowers interest rates
The real estate sector can look forward to another small interest rate cut. However, the SNB still sees a certain vulnerability in the real estate market.
The SNB eased its monetary policy further yesterday. The SNB key interest rate fell by 0.25 to 1.25%. The interest rate change took effect today. The SNB justified the move with lower inflationary pressure. However, inflation has risen slightly since the last assessment, reaching 1.4% in May. Services in the tourism sector and oil products in particular have contributed to this. "Overall, current inflation in Switzerland is mainly determined by inflation in domestic services," writes the SNB. Taking into account today's interest rate cut, the new conditional inflation forecast is similar to that of March and in the longer term it is slightly below the old forecast.
The annual average forecast inflation is 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026. The forecast is based on the assumption that the SNB key interest rate will be 1.25% over the entire forecast period. Without the interest rate cut decided today, the forecast would of course be lower.
Economy to grow by 1.5% next year
According to the SNB forecast, economic growth in Switzerland will remain moderate in the coming quarters. GDP growth of around 1% is expected for this year. Unemployment will therefore continue to rise slightly and utilization of production capacity will fall slightly. In the medium term, economic development should gradually improve, supported by somewhat stronger foreign demand. The SNB expects growth of around 1.5% in 2025.
"Vulnerability in the real estate market"
The main risk to this forecast is developments abroad. Momentum on the mortgage and real estate markets has been weaker in recent quarters than in previous years. "However, the vulnerabilities in these markets remain," writes the SNB.
"All good things come in threes"
Analysts at UBS assume that this was not the last interest rate cut. "All good things come in threes", writes the big bank in a statement. "After the two most recent interest rate cuts, we expect one last rate cut". The SNB is aiming for the neutral interest rate, i.e. the rate that has neither a stimulating nor restrictive effect. (aw)
