(Bloomberg) — The Swiss National Bank lowered borrowing costs at a second straight meeting, keeping it at the forefront of global interest-rate cuts as it battles low inflation and a strengthening franc.
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Officials in Zurich reduced their benchmark by 25 basis points to 1.25% on Thursday after a decision that observers found hard to predict. Some investors bet on a cut, while a small majority of the economists surveyed by Bloomberg anticipated no change. Policymakers also lowered their inflation projections, seeing it at 1% in 2026.
The Swiss franc weakened after the announcement, easing around 0.4% versus the euro, and tumbling 0.7% against the dollar. It had risen to a four-month high against the euro earlier this week as political turmoil in France boosted demand for the haven asset.
The SNB — which led major advanced economies with the first reduction in the current cycle in March — is now doubling down on that approach. That differs from global counterparts, with the Federal Reserve having just pared back projected cuts this year, and the European Central Bank showing reluctance to move again soon.
“There are clear reasons why the SNB would want to cut rates faster than the ECB,” said Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital, citing lower inflation and the franc. “The SNB is being bold and brave, but it is also playing with the fire of higher inflation in 2025.”
Elsewhere today, Norway’s central bank kept rates unchanged and said it will probably need to keep them at the highest level since 2008 for the rest of the year. Lingering inflation concerns will also keep the Bank of England on hold.
What Bloomberg Economics Says…
“As rates get closer to the estimate of the natural rate, the central bank is likely to move slower from now — we anticipate that the SNB will deliver a final rate cut, to 1%, most likely in December. Small downward revisions to the inflation forecast, however, suggest an earlier cut (in September) remains a possibility — particularly if political uncertainty remains elevated in Europe.”
—Maeva Cousin, senior economist. For full react, click here
A three-week period of silence by SNB officials had left investors in the dark guessing what the outcome would be on Thursday. The franc’s gains and inflation that was low by international standards bolstered the case for a cut, but consumer-price growth stuck at this year’s highest level were among arguments to hold.
Addressing reporters in Zurich, President Thomas Jordan said that the “underlying inflationary pressure has decreased further compared with the previous quarter owing to somewhat lower second-round effects.”
The franc’s appreciation thanks to “political uncertainties in Europe” is adding to uncertainty about elevated inflation, Jordan said. He also said the SNB remains “willing to be active in the foreign exchange market as necessary.”
The central bank also lowered its inflation forecast, seeing consumer-price growth within its 0-2% target range through 2026.
The SNB now predicts inflation will average at 1.3% this year, 1.1% in 2025 and 1% in 2026.
Swiss economic growth is seen at about 1% this year, before accelerating to around 1.5% in 2025.
–With assistance from Alexander Weber, Kristian Siedenburg, Joel Rinneby, Naomi Tajitsu, Alessandro Speciale, Paula Doenecke and Allegra Catelli.
(Updates with franc, Norway rate decision starting in third paragraph)
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