SNB decides to ease monetary policy after victory against inflation

In its monetary policy assessment, the SNB said that it cut interest rates because it had won the battle against inflation.

“The easing of monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective,” said the SNB. 

Further, it added that, “For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. According to the new forecast, inflation is also likely to remain in this range over the next few years.” 

The appreciation of the Swiss Franc over the last year and the need to “support economic activity” were given as other reasons for reducing interest rates. 

The Swiss economy saw its GDP growth sliced almost in half in 2023 when it recorded only a 1.3% expansion compared to 2.5% in 2022, according to its 2023 Annual Report. Lower interest rates will make it cheaper for businesses to borrow capital and a weaker Swiss Franc for them to export their wares abroad. 

The decision somewhat surprised markets, who had only rated the chances of a cut at about one in three prior to the event, according to Reuters. 

The bank also revised down its forecasts for future inflation and foresaw constraints to growth coming from a still-strong Swiss Franc and weaker demand from abroad.