The central bank has frightened the markets with its “rush forward” and is missing a policy of a steady hand. This is nonsense.
March 22, 2024 • Beat Schmid
The Swiss National Bank’s interest rate decision is a “big surprise”, which is how most commentators judge the reduction in the SNB’s key interest rate by 25 basis points to 1.5 percent. The decision is particularly surprising because the SNB is the first central bank in the ten largest currency areas to lower interest rates.
However, there were certainly voices who expected a reduction. Barclays, Citigroup and Julius Baer, for example, were right. They believed that the SNB would make a cut to protect the economy from possible currency strength. In addition, it has not gone unnoticed by SNB experts that it was Thomas Jordan who raised interest rates before the European Central Bank more than two years ago.
Of course, there is no hierarchy as to who can lower or raise interest rates first, even if some comments suggest so. The NZZ spoke before an “audition” that left you “perplexed”. It is quite possible that the SNB sees its “coup” as a signal of independence.
Die Curveballs von Thomas Jordan
The professionals were less surprised. “If I were to try to go long against any currency this week, it would be against the Swiss franc,” said Samuel Zief, head of global foreign exchange strategy at JP Morgan, ahead of the decision. The SNB is known for throwing “curveballs”. This refers to throws in baseball that are made with a lot of spin and are difficult to calculate.
It is quite possible that there is a banal logic behind the reduction. The SNB announces its interest rate decision once a quarter. This means that it can react to a changed initial situation less frequently than other central banks, which make their interest rate decisions more frequently. The Fed typically meets eight times a year to review its monetary policy decisions. The ECB meets monthly.
The SNB therefore has to wait a relatively long time until the next opportunity to cut interest rates if the other major central banks cut interest rates before it. The Swiss franc could then come under strong upward pressure. With its decision yesterday, the SNB seems to prefer to tighten interest rates rather than intervene in the foreign exchange market. Even if you might scare one or two observers.
2024-03-22 06:20:54
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