The Swiss National Bank (SNB) has announced another reduction in its key interest rate, cutting it by 25 basis points to 1.25%. This is the second time the SNB has lowered rates this year, following a previous reduction in March from 1.50% to the current rate. The decision aligns with the SNB’s projections that inflation will remain moderate at 1.4% in 2024 and 1.1% in 2025, with economic growth expected to be around 1% in 2024 and 1.5% in 2025. The SNB’s move is part of a global monetary easing cycle, contrasting with the hesitation of other central banks, such as the Bank of England, which is expected to maintain rates until at least August. The decision also diverges from the People’s Bank of China’s stance, which kept its interest rates unchanged and reflects the SNB’s commitment to ensuring price stability and adjusting monetary policy as necessary to maintain a comfortable inflation range in the medium term. The rate cut may also be aimed at stemming gains in the franc, which has surged in value recently. The SNB has reiterated its readiness to intervene in the foreign exchange market if needed. In response to these developments, Asian stock markets have shown mixed reactions, with the Hang Seng in Hong Kong and the Shanghai Composite in China experiencing moderate losses, while the Kospi in South Korea rose moderately. The dollar index was little changed, and the euro remained steady. Tech stocks, led by Nvidia, continued to rally, and investors are now looking for cues from the Federal Reserve on when it will start its policy easing cycle.
Key points
- The Swiss National Bank has cut its key interest rate to 1.
- The SNB’s decision contrasts with the Bank of England’s likely hold on rates, reflecting different monetary policy approaches among major economies.
- Asian markets experienced mixed responses to the global rate speculations, with some indices seeing moderate losses and others gains.
25%, marking its second rate cut of the year.
