Switzerland National Bank reduced its key interest rate for an additional 25 base points while the country’s economy is struggling with low inflation.
“With today’s adjustment rate, the SNB ensures that monetary conditions remain appropriate, given the low inflationary pressure and increased inflation risks,” says in the SNB press release.
The Bank will continue to closely monitor the situation and further adapt to monetary policy “to ensure that inflation remain within the range that is in line with price stability during the middle period”.
This move the main interest rate of the Bank is 0.25%. The reduction was greatly expected, and traders previously appreciated more than 70% of the chance of reducing a quarter of points.
The following is a decrease of 50 base points that the Central Bank announced in December, which, which at the time exceeded the expectations, transmits SEEbiz. This also marked the fourth reduction of interest rates by the SNB since Switzerland became the first major economy that mitigated Monetary Policy in March last year.
The decision on the rate comes after Swiss inflation fell on a nearly four-year-old level of 0.3% on an annual basis in February, according to official data. The Federal Statistical Office stated cheaper imports as a key factor that contributed to low inflation.
The SNB said on Thursday that inflation developed according to expectations from the previous estimation of monetary policy.
” A new conditional inflation forecast has almost not changed since December. Without today’s rates reduction, the forecast would be lower in the middle period, “the Central Bank added, saying that its inflation forecast in the range of prices in the medium term.
The SNB expects inflation to average 0.4% in 2025.
Stefan Gerlach, the main economist in the EFG bank, said the SNB was expecting inflation to fall to this level, saying that “sort of happens as the SNB thought he wanted.”
“I think the current decrease is justified to ensure that inflation does not fall too low,” Carolin Roth from the CNBC said, transmits SEEbiz.
Swiss franc weakely weakened after the Rate decision on the rate, and the euro increased by 0.06% compared to the franc. The franc is generally considered a safe currency refuge during political turmoil and uncertainty in the eurozone and has generally remained strong even though the SNB reduced interest rates.
