The Swiss National Bank on Thursday cut interest rates for the first time since June 2022 – the first to do so among the major central banks, saying the battle against inflation was working.
The SNB eased its monetary policy and cut its rate by 0.25 percentage points to 1.5 per cent, effective following a Swiss tightening policy for the first time since June 2022.
The Federal Reserve on Wednesday held US interest rates steady, but left open the door to three interest rate cuts before the end of the year.
The Bank of England and Norwegian central bank kept their key interest rate unchanged on Thursday but are forecast to start cutting later this year.
Central banks worldwide ramped up borrowing costs in recent years to control inflation, which surged when economies emerged from Covid-19 pandemic lockdowns and accelerated after energy producer Russia invaded agricultural power Ukraine in early February 2022.
In Switzerland, SNB chief Thomas Jordan said the decision to cut now was not to move before other central banks, but because it was “the right time” for the country.
READ ALSO: Switzerland removes customs duties on certain imports to cut prices
The move sent the Swiss franc sliding to multi-month lows versus the dollar and euro.
“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 SNB added in a statement.
“For some months now, inflation has been back below two percent and thus in the range the SNB equates with price stability.
“The Swiss central bank added that global economic growth was likely to remain moderate in the coming quarters, while inflation was likely to decline further.
Europe economist at Capital Economics, Adrian Prettejohn said the research group expected the Swiss central bank to cut rates a further two times in 2024.
“We forecast the SNB to cut rates at the September and December meetings taking the policy rate to one percent, where we think it will remain throughout 2025 and 2026,” he said.
The SNB warned that inflation could remain elevated for longer in some countries, while geopolitical tensions could increase.
“It therefore cannot be ruled out that global economic activity will be weaker than assumed.
“Our forecast for Switzerland, as for the global economy, is subject to significant uncertainty. The main risk is weaker economic activity abroad,” the central bank said.
Credible News.ng
