Switzerland caught the world’s economic observers by surprise when its central bank opted to cut interest rates, a first for a major Western economic power.
The Financial Times reported the Swiss National Bank cut its headline rate by 25 basis points to 1.5%. Thomas Jordan, chairman of the nation’s central bank, explained the time was right for a rate cut.
“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 Jordan. “For some months now, inflation has been back below 2% and thus in the range the SNB equates with price stability. “According to our new forecast, inflation is also likely to remain in this range over the next few years. With our decision, we are taking into account the reduced inflationary pressure as well as the appreciation of the Swiss franc in real terms over the past year.”
The Swiss example was not followed elsewhere in Europe – the Bank of England held interest rates unchanged at 5.25%, the fifth consecutive time that the status quo was retained. And yesterday, European Central Bank President Christine Lagarde refused to commit to upcoming cuts, issuing a warning yesterday that eurozone inflation will continue for the rest of 2024. Yesterday, the Federal Reserve announced it was keeping rates steady.