In a decisive move to stimulate the economy, the Swiss National Bank (SNB) has announced a reduction of its key interest rate by 25 basis points, bringing it down to 1.0%.
This marks the third cut in 2024 and aligns with broader trends observed in major Western economies, as central banks respond to softening inflation rates and economic conditions.
The SNB’s decision was anticipated by 30 of 32 analysts in a Reuters poll, reinforcing expectations of a more accommodating monetary policy.
Since it was the first major Western central bank to initiate rate cuts back in March, the SNB has continued its trend of easing, reflecting a shift in monetary strategy to support economic growth.
In conjunction with the SNB’s announcement, both the European Central Bank (ECB) and the US Federal Reserve recently indicated similar intentions.
Just last week, the Fed implemented a significant 50-basis-point cut, further highlighting a coordinated effort among central banks to navigate economic challenges.
Swiss inflation remains remarkably low, with the latest figures revealing a mere 1.1% annual increase for August.
The SNB has pointed out that the appreciation of the Swiss franc has played a critical role in reducing inflationary pressures, prompting this latest interest rate adjustment.
As a direct consequence of the SNB’s rate cut, the Swiss franc strengthened against major currencies.
Both the US dollar and the euro experienced declines, falling by approximately 0.14% and 0.16% against the Swiss currency, respectively.
In a statement, the SNB acknowledged the decrease in inflationary pressure compared to the previous quarter, attributing part of this decline to the currency’s recent rally.
The central bank noted,
The SNB’s easing of monetary policy today takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term.
As the global economic landscape evolves, market participants will closely monitor the SNB’s future actions and any additional rate cuts that may be on the horizon, as the bank aims to maintain stability in the Swiss economy.
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