/ Swiss National Bank cuts rates by 0.25% - expected to fall

While other countries hesitate, the Swiss National Bank cut rates for the second consecutive meeting. The 25 basis point cut brings the key interest rate to 1.25%. A relatively surprising decision, but only to a minority of analysts and market participants. Will this be the last rate cut? In the short term, most likely yes. At the same time, it is a sign of how different things are in Switzerland: both compared to its historical behavior and compared to the actions of other central banks.

The SNB made a similar reduction in March, when it became the first major central bank to embark on the current cycle of lower borrowing costs seen in most of the world. In the currency market, the Swiss franc fell 0.37% to 0.9536 against the euro, hitting a four-month low. Against the dollar, the Swiss franc traded at 0.8898, down 0.63%.

Restoring economic growth

The Swiss NB's decision comes amid a recent rebound in economic growth to 0.5% in the first quarter and Swiss inflation at 1.4% year-on-year. "Inflationary pressures have eased further compared to the previous quarter," the SNB said in its monetary policy statement. "Today's reduction in the key interest rate allows the Swiss NB to maintain appropriate monetary conditions," the central bank continued. Annual inflation is also expected to average 1.3% this year, 1.1% in 2025 and 1% in 2026.

The SNB's gross domestic product (GDP) forecast calls for growth of around 1% in 2024 and 1.5% in 2025. Prior to the decision, markets were pricing in a 68% chance of a rate cut and a 32% chance of rates remaining unchanged. Norway's central bank on Thursday left its main key rate unchanged at 4.50%, the highest in 16 years, and warned that any reduction in the cost of credit would not come until 2025 at the earliest, which is earlier than expected. Markets are now awaiting the Bank of England's decision. Economists expect rates to remain unchanged.