Synopsis:

Goldman Sachs expects the Swiss National Bank (SNB) to deliver two additional 25bp rate cuts in H1 2025 after its unexpected 50bp cut this week, citing reduced inflation risks and potential economic headwinds.

Key Points:

• December Decision: The SNB cut its policy rate by 50bp to 0.5%, exceeding consensus expectations for a 25bp reduction.
• Inflation Outlook: The SNB revised its inflation projection down, expecting inflation at 0.7% by Q3 2027 due to lower-than-expected oil and food prices.
• Policy Guidance: Despite removing its explicit easing bias, the SNB signaled concerns about inflation and FX developments, supporting further easing.
• Future Cuts Expected: Goldman Sachs maintains its forecast for two additional 25bp cuts in H1 2025, bringing the policy rate to 0%. This reflects expected economic challenges and continued franc appreciation pressure.

Conclusion:

Goldman Sachs sees the SNB’s recent policy action and guidance as consistent with further monetary easing in 2025, with a projected terminal rate of 0%.