The Swiss National Bank (SNB) has cut its key interest rate for the second consecutive meeting, highlighting its divergence from central banks in Europe and the United States in managing inflation.
The SNB reduced its main rate from 1.25% to XNUMX%, following similar measures taken in January.
According to the SNB’s statement, “core inflation pressures have eased compared to the previous quarter”.
The decision by the Swiss central bank comes shortly after the European Central Bank (ECB) made its first interest rate cut since 2019. Swiss policymakers have always been cautious about allowing the Swiss franc to appreciate significantly against the euro, as this could harm the country’s largest export market.
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“The Swiss National Bank stands ready to intervene in the foreign exchange market when necessary,” the central bank emphasized.
Although lower rates could push up inflation due to a depreciation of the Swiss franc, the recent actions by the European Central Bank have alleviated the SNB’s concerns about further rate cuts.
In Europe, the central banks of Czech Republic, Hungary, Sweden, and Serbia have also reduced borrowing costs this year. In contrast, the Federal Reserve has shown a preference for saving rate cuts, with indications that people are cautious about potential rate cuts starting no earlier than September.
