The Swiss National Bank (SNB) has, on Thursday, cut interest rates for the first time since June 2022, becoming the first major central bank to do so.
Effective from Friday, the SNB reduced its rate by 0.25 percentage points to 1.5 per cent. This move marks a departure from the tightened monetary policy initiated in 2022.
According to SNB chief Thomas Jordan, the decision to cut rates was not because SNB wanted to move before other central banks. It was rather prompted by the effectiveness of measures taken against inflation over the past two and a half years.
“The easing of monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective,” the central bank said in a statement.
“For some months now, inflation has been back below two per cent and thus in the range the SNB equates with price stability”, he stated.
The SNB emphasised that inflation in Switzerland is expected to remain within the target range in the foreseeable future. The decision to cut rates also considers reduced inflationary pressure and the appreciation of the Swiss franc over the past year.
This rate cut is expected to support economic activity and ensure appropriate monetary conditions. It comes amid concerns about the strength of the Swiss franc and its impact on Swiss industry, which has been experiencing a slowdown in orders.
While some economists anticipated the SNB to maintain its key rate, the bank took a proactive step. Other major central banks like the Federal Reserve and the European Central Bank are anticipated to make rate adjustments in the coming months.
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