Morning Bid: ECB, Swiss Set to Cut, But By How Much?

As the European Central Bank (ECB) and the Swiss National Bank (SNB) prepare to announce their interest rate decisions today, markets are abuzz with speculation about the extent of the cuts. Both central banks are expected to lower rates, but the question remains: by how much?

The ECB is widely anticipated to cut rates by 0.25%, following a series of rate hikes in 2022 and 2023. This would bring the deposit rate down to 3%, a significant reduction from the peak of 3.25% reached in September 2023. The ECB's decision to cut rates is driven by moderating inflation and concerns about economic growth. Inflation, while still above target, has been easing, and the ECB aims to strike a balance between combating inflation and supporting economic activity.



The SNB is also expected to cut rates, with a 0.25% reduction likely. This would bring the policy rate down to 1.25%, a significant decrease from the peak of 2% reached in September 2023. The SNB's decision to cut rates is influenced by the appreciation of the Swiss franc, which has contributed to a decrease in inflationary pressure. The SNB aims to ensure price stability over the medium term while supporting economic growth.



Geopolitical risks, such as the return of Donald Trump to the White House, are a significant factor influencing the ECB's decision. The potential impact of Trump's policies on the Eurozone economy has led economists to downgrade growth forecasts for 2025. By cutting rates, the ECB aims to boost the Eurozone's economy, encouraging borrowing and investment, and mitigating the risks posed by geopolitical uncertainties.

In conclusion, the ECB and SNB are expected to cut interest rates today, with the ECB likely to reduce rates by 0.25% and the SNB by 0.25%. The decisions are driven by moderating inflation, concerns about economic growth, and geopolitical risks. As an investor, it is crucial to stay informed about these developments and their potential impact on your portfolio.