Published26 September 2024, 09:47
Key interest rate: rent, mortgage, Swiss franc: This is what the interest rate cut means for you
When the country’s monetary authorities lower the key interest rate, this affects numerous aspects of everyday life. 20 minutes tells you what to expect.
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SNB key interest rate: What it’s about
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The National Bank has lowered the key interest rate.
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Now it is only at 1 percent.
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This is good for renters and home buyers.
The Swiss National Bank (SNB) is lowering the key interest rate by 0.25 percentage points to 1 percent. The new interest rate will apply from Friday. The SNB announced this on Thursday morning. 20 minutes tells you what the interest rate cut means.
Meaning
The interest rate cut comes as no surprise. Many market participants had expected it. Some even expected an interest rate cut of 0.5 percent, says Philipp Burckhardt, fixed income strategist and portfolio manager at the bank Lombard Odier IM, to 20 Minuten.
That is why the SNB has now disappointed expectations somewhat. “With today’s 0.25 percent, the SNB has shown quite clearly that it has not yet reached its goal,” says Burckhardt.
National banks use the key interest rate to control the money market. This is how they want to keep prices stable. The level of the interest rate indicates how much banks have to pay when they borrow money from a central bank. A high interest rate makes money more expensive, a lower one makes it cheaper.
The new inflation forecast now tends towards the lower end of the price stability definition, opening the door for further interest rate cuts. “We think the SNB will follow suit in December and lower interest rates further,” said Burckhardt.
In contrast, expectations for growth remained unchanged and slightly positive. This is not a bad starting point for the Swiss economy.
These are the consequences of the interest rate cut
Burckhardt explains the consequences of the interest rate decision:
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«Die Mortgages are now cheaper, even though some market participants had expected 0.5 percent. The intention to announce further interest rate cuts is surprising and has pushed interest rates and therefore mortgages down further.»
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«Lower interest rates push the reference interest rate down, which leads to lower Rent This does not necessarily have to happen in the next few months, as it is an average that is not very reactive, but the trend is promising.”
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«In the first step, both the interest rate cuts and the prospect of further interest rate hikes will lead to a weaker Swiss franc. Shopping abroad is becoming more expensive. A look at the European Central Bank is also very relevant here. If inflation and growth in the eurozone prompt the European Central Bank to cut interest rates more than expected, the euro would in turn depreciate relatively and the Swiss franc would strengthen relatively.
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«Die Interest on savings account are usually adjusted immediately by the banks, meaning there will be less interest on savings in the future.»
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«Today’s decision has a stimulating effect and supports both demand and the Swiss exchange rate. A positive day for the Swiss economy.»
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