Banks’ sight deposits held at the SNB will be remunerated at the SNB policy rate up to a certain threshold, and at 0.5 per cent above this threshold.

The central bank will also be active in the foreign exchange market as necessary.

Inflationary pressure in Switzerland has again decreased significantly compared to the previous quarter. This drop reflects the appreciation of the Swiss franc over the last three months, an SNB release said.

SNB’s easing of monetary policy takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may be necessary in the coming quarters to ensure price stability over the medium term, it noted.

Inflation in the period since the last monetary policy assessment was lower than expected, standing at 1.1 per cent in August compared to 1.4 per cent in May. Imported goods and services in particular contributed to the decline. Overall, inflation in Switzerland is currently being driven mainly by higher prices for domestic services.

The new conditional inflation forecast is significantly lower than that of June. The stronger Swiss franc, the lower oil price and electricity price cuts announced for next January have contributed to the downward revision.

The stronger decline in inflation also means that weaker second-round effects are expected in the medium term.

The new forecast is within the range of price stability over the entire forecast horizon. It puts average annual inflation at 1.2 per cent for 2024, 0.6 per cent for 2025 and 0.7 per cent for 2026.

The forecast is based on the assumption that the SNB policy rate is 1 per cent over the entire forecast horizon. Without the latest rate cut, the conditional inflation forecast would have been even lower.

The forecast is subject to significant uncertainty. Developments abroad represent the main risk.

Momentum on the mortgage and real estate markets in recent quarters has been weaker than in previous years. While the vulnerabilities in these markets have receded slightly, they still exist.

Fibre2Fashion News Desk (DS)