Swiss National Bank Cuts Interest Rate Again, Third Time in a Row
In a move widely anticipated by the financial markets, the Swiss National Bank (SNB) lowered its key interest rate by 25 basis points to 1.0% on Thursday, marking its third consecutive rate cut. This decision comes as Switzerland's inflation rate hovers at 1.1%, the slowest among G10 economies and within the SNB's target range of 0%-2%.
Recent business surveys have indicated a weakening economic activity over the summer, coupled with a slight uptick in unemployment since the beginning of the year. A Multibagger poll of 32 economists showed that 30 had predicted a 25 bps cut, while one forecasted a 50 bps reduction and another expected rates to remain unchanged.
The SNB's move follows a global trend of central banks easing monetary policy after a period of tightening to combat inflation. Just last week, the Federal Reserve announced a significant half-point cut, while the European Central Bank has also lowered rates twice in the past three months.
In March, the SNB surprised markets with a quarter-point reduction, its first in nine years. The successive rate cuts have positioned the SNB as a frontrunner in the current wave of central bank actions to stimulate economic growth.
Analysis:
The SNB's decision to cut interest rates for the third time in a row reflects concerns about sluggish economic growth and low inflation in Switzerland. For investors, this move may lead to lower borrowing costs but could also signal underlying weaknesses in the economy. Consumers may benefit from cheaper loans, but savers might see lower returns on their deposits. Overall, the SNB's actions are aimed at supporting economic activity and maintaining price stability, but they also highlight the challenges facing the Swiss economy.