Basel, 07.06.2024

The ECB has dampened hopes of interest rate cuts: What does this mean for Switzerland?

As expected, the European Central Bank (ECB) cut interest rates in June. However, the central bankers continue to avoid giving any outlook on future rate cuts. In Germany, businesses and economists are hoping for more support, but what does this mean for the mortgage landscape in Switzerland?

ECB Meeting in June: A Recap

ECB President Christine Lagarde hinted at the press conference that it is “very likely” that the phase of interest rate cuts has begun. The eurozone’s central bankers have cut interest rates after lowering inflation and growth forecasts for the eurozone. However, they remain cautious about further steps. The ECB Governing Council stressed that the 2% inflation target for next year was achievable, allowing them to cut rates to 3.75%.

Economic Brake

The ECB signaled that its monetary policy remains restrictive and will continue to slow the economy to mitigate inflationary risks. At least six more rate cuts of 0.25 percentage points may be needed before the economy is no longer slowed.

Impact on Switzerland and Mortgages

As the ECB adjusts its interest rate policy, the question arises as to how this will affect Switzerland. It is important to note that the ECB’s decisions do not have a direct impact on Swiss mortgage rates. The Swiss National Bank (SNB) independently sets interest rates in Switzerland and will do so in June.

Mortgage rates in Switzerland have been relatively moderate for some time. The SNB has pursued a very cautious interest rate policy in recent years to support the economy and avoid the risk of deflation. Even if the ECB lowers its interest rates, the SNB will make its decisions based on the specific economic conditions in Switzerland. It is therefore possible that Swiss mortgage rates will remain stable regardless of what happens in the eurozone.

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The Bottom Line

The ECB’s recent decisions underscore the central bank’s continued caution regarding interest rate cuts. For Switzerland, it remains to be seen how the SNB will react in June. One thing is certain, however: the ECB’s decisions do not have a direct impact on Swiss mortgage rates. The SNB will continue to act independently to ensure the stability of the Swiss economy. Stay informed about the latest developments in interest rates and economic policy to make informed decisions about your mortgages and financing.

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