Flash boursier

Of the five central bank meeting last week, the Fed grabbed the headlines. But so did the SNB – for once.

The Fed left rates unchanged. The main talking point for this meeting was the level of anxiety following the inflation upticks in January and February. The Fed still sees inflation as high, and updated quarterly economic forecasts indicate that the price index for personal consumption expenditures (PCE), excluding volatile food and energy components, will be up 2.6% at year-end compared with 2.4% in December forecasts. Figures will be released on 29 March, when many markets will be closed for the Easter holiday. A PCE number deviating from forecasts could have a major impact on market rates given the reduced liquidity that is usual on those days. In any case, Jerome Powell thinks that indicators are on the right track, despite a few upsets along the way, when considering the decline in inflation from its June 2022 peak.

On the growth front, the 2024 projection was raised to 2.1% compared with 1.4% last December. But the most eagerly awaited news was undoubtedly the dot plot, which has barely changed, showing that Fed members consider their base case to be playing out. The Fed’s rate-cut forecasts and market expectations are finally in line, with both projecting three rate cuts in 2024.

Elsewhere, the SNB cut its benchmark rate by 25 basis points, much to everyone’s surprise and making it the first major central bank to loosen monetary conditions. Its revised conditional inflation forecast is significantly lower than in December, and second-round effects have also been revised downwards.

In fact, the central bank is concerned about the Swiss economy and forecasts sluggish GDP growth for 2024 on account of weak foreign demand and real-term appreciation in the franc since the beginning of 2023. Even though the Swiss franc has retraced some of its gains year to date, it is still up against the euro and the dollar relative to the start of 2023.

The final factor that may have influenced the SNB’s decision was the timetable. As the policy committee does not meet as often as the SNB’s peers, its next session will take place after those of the Fed and the ECB, which are now expected to make their first easing moves. If it wanted to avoid further appreciation in the Swiss franc, the SNB had only limited room for manoeuvre and had no choice but to lower interest rates in the here and now.

Against this backdrop, the S&P 500 – which last week hit its 20th all-time high of the year – ended the week up 1.65%. The Nasdaq gained 1.97% and the Dow Jones rose by 1.77%, edging close to the 40,000 mark. In Europe, the Stoxx Europe 600 increased by 1.13%.