The Swiss National Bank (SNB) has cut its key interest rate for the second time this year, reducing it by 25 basis points to 1.25%. This decision, announced on Thursday, responded to anticipated reductions in inflationary pressures.
In May, inflation rose slightly to 1.4% from April but is expected to average around 1.3% for the remainder of the year. The SNB projects that if interest rates remain at 1.25%, inflation will fall to 1.1% in 2025 and further to 1% in 2026.
According to the central bank, “The underlying inflationary pressure has decreased again compared to the previous quarter. With today’s lowering of the SNB policy rate, the SNB is able to maintain appropriate monetary conditions.”
The SNB’s decision aligns with the expectations of two-thirds of economists polled by Reuters, who had anticipated a 25-basis-point cut to 1.25%. The central bank’s statement highlighted that higher inflation in rents, tourism services, and oil products contributed to the recent increase. Still, overall inflation is being driven primarily by domestic service prices.
Switzerland’s banking and financial services sector, traditionally a cornerstone of its economy, has been facing challenges; however, the recent collapse of Credit Suisse and increasing competition from financial hubs like Hong Kong, the US, and Singapore have pressured the sector. As Switzerland continues to ease monetary policy, other major economies, including those in Europe and the US, are trying varied strategies to manage inflation.
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