The Swiss National Bank (SNB) cuts its key interest rate and thus takes on a pioneering role
The Swiss National Bank (SNB) lowered its key interest rate to 1.5 per cent this morning. This makes it the first western central bank to start easing its monetary policy framework. In the context of the current economic situation, the interest rate cut seems entirely understandable and appropriate. Swiss inflation has weakened considerably in recent months and the risk of a new rise in inflation is currently very low. In addition, the Swiss economy has barely grown for 6 quarters.
Both the US Federal Reserve (Fed) and the European Central Bank (ECB) have decided in recent days to maintain the current key interest rate. The SNB is thus taking on the somewhat unusual role of pioneer among international central banks. However, this move is well justified: Due to low inflation, the starting position for the SNB is much more comfortable than for most other central banks. In addition, by widening the interest rate differential with the European Central Bank (ECB), the SNB is likely intending to weaken the Swiss franc and thus strengthen the economy. In addition, both the Fed and the ECB have confirmed their intention to ease their monetary policy over the course of the year. This means that the SNB is only likely to be an outlier in the short term.
