This decision was influenced by a decrease in ‘underlying inflationary pressure’, despite an increase in costs such as rents, tourism services and oil products
The Swiss National Bank (SNB) announced on Thursday that it has reduced its main policy rate by a quarter of a percentage point.
This decision was influenced by a decrease in “underlying inflationary pressure”, despite an increase in costs such as rents, tourism services and oil products. Earlier this year, the central bank became the first among major financial centres to cut interest rates, surprising many market observers with a similar quarter-point reduction in March.
The SNB stated that the new rate of 1.25%, down from 1.5%, will come into effect on Friday. The bank highlighted that current inflation in Switzerland is primarily driven by higher prices for domestic services.
In recent months, major central banks have been tightening monetary policy to fend off inflation pressures. This is achieved by making borrowing more expensive, which can slow economic activity and thus control upward pressure on prices.
The SNB reported that “Global economic growth was solid in the first quarter of 2024. Inflation largely moved sideways over the past months, and remained above central banks’ targets in many countries. However, the underlying inflationary pressure continued to decrease slightly.”
The bank also noted that several other central banks have recently eased monetary policy after a two-year tightening cycle. The Swiss bank warned that inflation could remain high in some countries and that “geopolitical tensions” could hinder global economic activity.
