The Swiss National Bank announced on Thursday that it has decided to lower its main policy rate by a quarter of a percentage point. This move comes in response to a decrease in underlying inflationary pressure, despite certain cost increases such as rents, tourism services, and oil products. The central bank's decision to reduce the interest rate to 1.25% from 1.5% will go into effect on Friday.
Earlier this spring, the Swiss National Bank made headlines by becoming the first major financial institution to cut interest rates. In March, it implemented a similar quarter-point reduction, surprising many market analysts. The bank highlighted that inflation in Switzerland is currently being primarily driven by higher prices for domestic services.
For several months, central banks worldwide had been tightening monetary policy to combat inflationary pressures. By increasing the cost of borrowing, they aimed to slow down economic activity and mitigate upward pressure on prices. However, the SNB's recent decision to lower interest rates reflects a shift in this trend.
The SNB's statement acknowledged that global economic growth was robust in the first quarter of 2024. While inflation remained relatively stable in recent months and exceeded central banks' targets in various countries, the underlying inflationary pressure showed a slight decline.
Notably, several other central banks have also opted to ease their monetary policies following a period of tightening over the past two years. The SNB warned that inflation could remain elevated in certain countries, and highlighted potential economic challenges stemming from geopolitical tensions on a global scale.
