The Swiss National Bank (SNB) cut its policy rate by a quarter of a percentage point to 1.5%. This is the first interest rate cut in Switzerland in nine years and is a surprise move.
“Monetary policy easing was possible because the fight against inflation over the past two and a half years has been effective,” the central bank said.
According to the SNB, inflation was 1.2% in February, below the maximum level of 2% for price stability.
The SNB began a cycle of increasing interest rates in June 2022, before which the discount rate was -0.75%.
In a Reuters poll earlier this month, 80% of economists predicted the SNB would keep its policy rate unchanged at 1.75%.
The central bank expects Swiss GDP growth to remain modest in coming quarters, with weak demand from abroad and the appreciation of the Swiss franc in real terms over the past year having a dampening effect. Switzerland’s GDP is likely to grow by around 1% this year.
The SNB warned that its forecasts for Switzerland and the global economy were subject to significant uncertainty, with the main risk being a slowdown in economic activity abroad.
Carsten Junius, chief economist at J Safra Sarasin, supports rate cuts. He wrote on X: “Great decision by the SNB to cut rates today rather than wait for the Fed or [European Central Bank] Do it in this way. The SNB rightly focuses on Swiss data, which show low inflation rates. [are likely to] will remain within the target range in the coming years.”