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The Swiss central bank is the first among developed economies to cut interest rates by 25 bps to 1.5%, marking the first cut in nine years.
The monetary tightening was a surprise move, with easing mostly expected to start only in June 2024 for major central banks.
This step comes after Swiss inflation dipped to 1.2% in February, the ninth consecutive month that prices have been moving within the SNB’s 0-2% target range, indicative of price stability.
The central bank explained, “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. For some months now, inflation has been back below 2%, and thus in the range the SNB equates with price stability. According to the new forecast, inflation is also likely to remain in this range over the next few years.”
Inflation is expected to average 1.4% in 2024, 1.2% in 2025, and 1.1% in 2026, according to the SNB. In the meantime, economic growth is probably going to stay slow in the upcoming quarters, with this year’s growth rate expected to be about 1%.
The Swiss franc (USD:CHF) (FXF) was weakened beyond 0.895 against the US dollar, touching its lowest level since mid-November.
