Monetary policy assessment of 21 March 2024
Central bank: snb | Type: statement | Date: 2024-03-21

Monetary policy assessment of 21 March 2024
and lowers SNB policy rate to 1.5%
The change applies from tomorrow, 22 March 2024. Banks’ sight deposits held at the SNB
will be remunerated at the SNB policy rate up to a certain threshold, and at 1.0% above this
threshold. The SNB also remains willing to be active in the foreign exchange market as
necessary.
The easing of monetary policy has been made possible because the fight against inflation over
the past two and a half years has been effective. For some months now, inflation has been
back below 2% and thus in the range the SNB equates with price stability. According to the
new forecast, inflation is also likely to remain in this range over the next few years.
With its decision, the SNB is taking into account the reduced inflationary pressure as well as
the appreciation of the Swiss franc in real terms over the past year. The policy rate cut also
supports economic activity. Today’s easing thus ensures that monetary conditions remain
appropriate.
The SNB will continue to monitor the development of inflation closely, and will adjust its
monetary policy again if necessary to ensure inflation remains within the range consistent
with price stability over the medium term.
Inflation has declined further since the beginning of the year, and stood at 1.2% in February.
This decrease was attributable to lower goods inflation. Inflation is currently being driven
above all by higher prices for domestic services.
The new conditional inflation forecast is significantly lower than that of December. In the
short term, this is above all due to the fact that price momentum in the case of some categories
of goods has slowed more quickly than had been expected in December. In the medium term,
lower second-round effects are leading to a downward revision. Over the entire forecast
Zurich, 21 March 2024
Press release
horizon, the conditional inflation forecast is within the range of price stability (cf. chart). The
forecast puts average annual inflation at 1.4% for 2024, 1.2% for 2025 and 1.1% for 2026
(cf. table). The forecast is based on the assumption that the SNB policy rate is 1.5% over the
entire forecast horizon.
The global economy grew moderately in the fourth quarter of 2023. Having declined rapidly
in many countries in 2023, inflation has decreased at a somewhat slower pace in recent
months. Inflation in many countries remains above central banks’ targets. Against this
background, many central banks have left their restrictive monetary policy unchanged for the
time being.
Global economic growth is likely to remain moderate in the coming quarters. Inflation is
likely to decline further, not least due to the restrictive monetary policy.
This scenario for the global economy is still subject to significant risks. Inflation could remain
elevated for longer in some countries, necessitating a tighter monetary policy there than
expected in the baseline scenario. Equally, geopolitical tensions could increase. It therefore
cannot be ruled out that global economic activity will be weaker than assumed.
Swiss GDP growth was moderate in the fourth quarter of last year. The services sector
expanded again, while value added in manufacturing stagnated. Unemployment rose
somewhat further, and the utilisation of overall production capacity was normal.
Growth is likely to remain modest in the coming quarters. The weak demand from abroad and
the appreciation of the Swiss franc in real terms over the past year are having a dampening
effect. Overall, Switzerland’s GDP is likely to grow by around 1% this year. In this
environment, unemployment is likely to continue to rise gradually, and the utilisation of
production capacity is likely to decline somewhat further.
Our forecast for Switzerland, as for the global economy, is subject to significant uncertainty.
The main risk is weaker economic activity abroad.
Momentum on the mortgage and real estate markets has weakened noticeably in recent
quarters. However, the vulnerabilities in these markets remain.
More detailed information on the monetary policy decision can be found in the
introductory
remarks of the Governing Board.
Zurich, 21 March 2024
Press release