RBA set to hold, while SNB may consider bold rate move

China's central bank unexpectedly boosted market sentiment with a policy shift that caught many off guard. The People's Bank of China (PBOC) reduced its 14-day repo rate by 10 basis points, following its decision last Friday to leave longer-term rates unchanged. The market's focus, however, has now shifted to tomorrow’s press conference by China’s top three financial regulators, fueling hopes that more extensive stimulus measures could be unveiled to support the economy.

RBA to hold rates; SNB faces critical policy decision

Two major central banks are under the microscope this week. The Reserve Bank of Australia (RBA) is expected to maintain its policy stance, while the Swiss National Bank (SNB) faces a critical decision amid increasing pressure to ease further. The SNB, facing calls to weaken the Swiss franc, may consider a more aggressive rate cut than previously anticipated.

The RBA is widely expected to keep its key interest rate at 4.35% in this week's meeting. While the central bank has not ruled out further hikes, most economists believe the next move will be a rate cut, although the timing remains uncertain. Australia's monthly CPI data, due this week, is expected to show inflation easing from 3.5% to 2.8% in August, offering the RBA some short-term relief. However, the more telling figure will be the quarterly CPI report, due on October 30, which is likely to play a pivotal role in future policy decisions.

The RBA’s November meeting will be closely watched, as the central bank will have both quarterly inflation data and updated economic projections. By then, policymakers will likely have a clearer view of whether inflation is moderating enough to justify a rate cut in early 2025.

Meanwhile, the SNB is widely expected to lower its interest rate this week, though the extent of the reduction remains uncertain. While the Swiss franc’s appreciation has eased slightly since August, it remains at historically high levels, posing a challenge for Switzerland’s export-driven economy. Outgoing SNB Chair Thomas Jordan has underscored the negative impact of the strong franc, with Swiss exporters urging the central bank to take more decisive action.

The consensus expectation is for a 25 basis point rate cut, bringing the SNB’s policy rate down to 1.00%, with another 25 basis point reduction likely in December. However, given the economic headwinds and pressure to weaken the franc, some expectations suggest that the Swiss National Bank may implement a larger cut of around 50 basis points at this meeting.