SNB Should Cut Rates Without Awaiting ECB, Sarasin’s Junius Says
(Bloomberg) — The Swiss National Bank shouldn’t wait for global peers to cut interest rates and ought to go ahead with a move next week, according to Bank J Safra Sarasin Ltd Chief Economist Karsten Junius.
In a commentary published on Neue Zuercher Zeitung’s The Market website on Wednesday, he warned that Switzerland’s economy is growing below its potential, and that price pressures are dissipating.
“An early interest rate cut and a resulting weakening of the franc is therefore the best insurance that Switzerland does not slip back into an environment of negative inflation rates and interest rates,” he said. “The risk of a policy mistake and a subsequent U-turn is low.”
A cut at the SNB’s decision on March 21 — its inaugural gathering of 2024 — would make the central bank the first in western Europe to lower borrowing costs in the current cycle.
While Switzerland’s trade dependence on the surrounding euro zone might suggest grounds for caution, officials led by President Thomas Jordan have been unafraid to act before their bigger neighbor in the past. They surprised investors with an initial 50 basis-point hike in June 2022, a month before the European Central Bank followed suit.
Junius said that with inflation under control, the Swiss should again act on their own.
“The SNB is the first big central bank that can declare victory,” he wrote. “It should also do so.”
The question of how central bank policies relate to each other has gained prominence in recent days. Questioned last week about investor expectations converging on the timing of initial rate cuts in both the euro zone and the US, ECB President Christine Lagarde insisted that her institution “will act independently.”
“The thinking goes, the SNB would be safer waiting until June, when the ECB and the Fed are also likely to cut their key interest rates,” Junius said. “This may be the case if the risk of inflation is mainly to the upside. Yet this is no longer the case in Switzerland.”
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