By Ed Frankl
Switzerland's central bank on Thursday held its key policy rate steady as expected at 1.75% and lowered its inflation forecast for next year, but warned that uncertainty was clouding the decision-making path ahead.
"Inflationary pressure has decreased slightly over the past quarter. However, uncertainty remains high," the Swiss National Bank said.
The decision comes after annual inflation stood at 1.4% in November, down from 1.7% in October, driven by lower inflation on goods and tourism services, it said.
But inflation is likely to tick up again in the coming months on higher electricity prices, rents and on a rise in sales tax, the SNB added.
Other major central banks have held interest rates in recent meetings as inflation has ticked down. The Federal Reserve kept rates steady on Wednesday, while both the European Central Bank and the Bank of England are expected to hold rates later on Thursday.
Meanwhile, the SNB lowered its expectations for inflation under fresh forecasts. It now expects annual inflation to average 2.1% in 2023, 1.9% in 2024 and 1.6% in 2025, from 2.2% in 2023 and 2024 and 1.9% in 2025 under previous forecasts made in September.
The lower inflation estimates, alongside the SNB's reduced emphasis on selling foreign currency compared with previous meetings, supports the view the SNB will cut rates first in March, according to Adrian Prettejohn, Europe economist at Capital Economics.
The SNB also said Switzerland's economy is likely to grow by around 1% this year, and between 0.5% and 1% in 2024, but cautioned that the main risk is a more pronounced economic slowdown abroad.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
12-14-23 0418ET
