The Swiss National Bank lowered its policy rate by 50 basis points to 0.5% on Thursday, marking its second consecutive rate cut and signaling growing concern about inflation cooling faster than expected across the eurozone and Switzerland.
SNB Governing Board Chairman Martin Gruebel stated the central bank stands ready to adjust rates further if economic conditions warrant it. The cut reflects a sharper pivot than markets anticipated, as the SNB had previously telegraphed a more gradual easing cycle.
Switzerland's inflation has decelerated substantially from its 3.5% peak in 2022, moving closer to the SNB's 2% target. The Swiss franc weakened immediately following the announcement as investors repositioned out of the currency. EUR/CHF climbed to 0.96 francs per euro, up from 0.95 before the decision.
The SNB's aggressive stance contrasts with the European Central Bank's measured approach. While ECB policymakers have signaled patience before cutting further, the SNB appears willing to move faster given domestic conditions. Switzerland's economy has shown resilience, but growth momentum has softened, with GDP expansion at 0.4% in the first quarter.
This cut positions the SNB ahead of other major central banks in the easing cycle. The Federal Reserve maintains rates at 5.25%-5.50%, while the Bank of England holds at 5.25%. Markets now price in further SNB cuts through 2024.
Swiss government bonds rallied on the news, with 10-year yields falling 8 basis points to 0.98%. Equity markets reacted positively initially, though broader European indices remained choppy due to mixed earnings reports and persistent geopolitical tensions.
The SNB holds its next monetary policy meeting in September. Gruebel's forward guidance suggests the board is data-dependent and