House opinion in April

Every month we publish our opinion on the macroeconomic environment.

The Swiss National Bank pointed to declining consumer prices in Switzerland when it cut rates in March. And indeed, inflation has come down significantly in recent months to currently stand at 1%. The SNB is assuming inflation in Switzerland will head down even further. So reducing the benchmark rate from 1.75% to 1.5% was the right thing to do. But now the question is whether the economic situation in the country at present would justify a second cut. The committee takes the view that a further reduction as early as June is likely.


Things look different in the USA, where inflation is still relatively high. The most recent release of consumer prices shows them to be increasing 3.5% year on year, well above the Fed’s 2% target. However, despite the high interest rates the US economy is proving robust and producing surprisingly good data, reducing the need for rate cuts in the near future. The comments from Minneapolis Fed Chairman Neel Kashkari that it will not rush to cut rates unless inflation is clearly declining unsettled investors and suggest the Fed will be reluctant to move soon.


The person with the most difficult job of all major central bankers is undoubtedly ECB President Christine Lagarde. The European economy is not doing well and is threatening to slip into a technical recession. At the same time, some members of the currency union are highly indebted and inflation remains above the ECB’s target. The central bank has clearly indicated that rate cuts will be on the agenda soon, but is unwilling to risk consumer prices shooting up again too quickly.


In this environment, the macroeconomic committee assumes the Swiss National Bank may cut rates by a further 0.25% to 1.25% in June. Over the summer the European Central Bank is likely to succumb to the temptation to stimulate the economy, whereas given the most recently released inflation figures the Fed will probably wait until later.