The Swiss National Bank has cut its main policy rate by 25 basis points to 1.25%, citing reduced inflationary pressure.
The Swiss National Bank (SNB) has reduced its main policy rate by 25 basis points to 1.25%, as reported by Reuters and the Washington Post. This comes as a continuation of the global policy easing cycle, following a similar cut in March.
The SNB has pointed to the reduction of "underlying inflationary pressure" as the primary reason behind the decision, despite witnessing an increase in costs for items such as rents, tourism services, and oil products. The SNB Chairman, Thomas Jordan, expressed that the cut enables the maintenance of "appropriate monetary conditions" in the face of declining inflation forecasts. These forecasts project inflation at 1.0% by the first quarter of 2027.
The Swiss franc saw a dip against other major currencies, while stock prices rose in response to the central bank's announcement. The SNB's actions reflect a broader trend among central banks, as some have started to shift from tightening to easing monetary policies.
The move comes amid a backdrop of global economic uncertainties, including geopolitical tensions and the upcoming French elections, which have driven the Swiss franc up by 4.5% against the euro over the past month. Jordan emphasized the central bank's readiness to engage in the foreign exchange market if necessary.
According to ING economist Peter Vanden Houte, "With decent Swiss GDP growth in the first quarter there was no real urgency for the SNB to cut rates, but given the still benign inflation outlook the SNB saw a window to ease... For the SNB it was more a rate cut because it could, not because it should." Thomas Gitzel, chief economist at VP Bank Group, supported the SNB's decision, suggesting that refraining from another rate cut could have signaled uncertainty.
On the same day, other central banks, including the Bank of England and Norway's central bank, also made their policy announcements, with the former expected to maintain rates.
Economists believe that the latest cut by the SNB narrows the scope for further easing, with UBS economist Maxime Botteron indicating that the "policy rate is now closer to its terminal value," suggesting limited potential for additional reductions.
