The central bank of (SNB) unexpectedly reduced its base by 25 basis points, moving months ahead of its global counterparts, as policy makers try to prevent the franc’s profits, according to a Bloomberg report. Officials in Switzerland reduced their reference rate to 1.5%, the first such reduction for one of the 10 currencies with most transactions in the world since the pandemic retreated. While some investors were betting on such a reduction, most economists predicted that the interest rate would remain unchanged at least until June. The franc retreated after the decision, yielding 1% against the euro at its weakest level since July 2023. He retreated 1.2% against the dollar in a new low four months. “The relaxation of our monetary policy has been made possible because the fight against inflation over the last 21/2 years has been effective,” said President Thomas Jordan, today (21.3,2024). SNB presented a lower forecast for consumer price profits, seeing them not higher than 1.5% by 2026. SNB’s move heralds possible relaxation later this year by the Federal Reserve and the European Central Bank, removing rising pressure from the franc and reducing the need for officials to resort to interventions that could further increase their large balance sheet. Acting now, Jordan and his colleagues avoid the prospect of waiting for such global counterparts to move first. The quarterly calendar of SNB includes only half the planned communications from the Fed and the ECB and its next decision in June takes place after them. SNB “used its margin of manoeuvre to support economic growth by reducing interest rates early,” Raiffeisen economist told Switzerland Alexander Koch. “However, the comparatively moderate level of interest rates, along with the robust economy, means that excessive aggressive relaxation should not be expected during the year”.
The central bank of Switzerland reduced interest rates by 0.25%
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