The Japan Times - Swiss cut rates again over global economic 'uncertainty'

The Swiss National Bank cut rates by a quarter percentage point to 0.25 percent -- its fifth cut in a row, dating back to March 2024.

While the US Federal Reserve paused interest rate cuts again on Wednesday and the Bank of England opted for the status quo on Thursday, the SNB said it was easing monetary policy further.

"The economic outlook for Switzerland has become considerably more uncertain," the SNB said in a statement.

"Against the backdrop of increased trade and geopolitical uncertainties worldwide, developments abroad continue to represent the main risk."

The SNB said it anticipated that global economic growth would remain moderate over the coming quarters, while inflationary pressure should continue to ease gradually over the next quarters, particularly in Europe.

However, "This scenario for the global economy is currently subject to high uncertainty. The situation could change rapidly and markedly, particularly from a trade and geopolitical perspective," it said.

"For example, increasing trade barriers could lead to weaker global economic development. At the same time, a more expansionary fiscal policy in Europe could provide stimulus to the economy in the medium term."

At around 1415 GMT, the Swiss franc was down 0.6 percent against the US dollar at 0.8835 to the dollar. It slid 0.4 percent to 1.1455 to the pound. It was flat against the euro 0.9572 to the euro.

- 'Heightened downside risks' -

In making its decision, the SNB had to contend with low inflation in Switzerland -- decreasing from 0.7 percent in November to 0.3 percent in February -- and the high uncertainties in the face of tensions around Trump's wave of tariffs and multiple U-turns.

Furthermore, its interest rate is already low compared to other central banks, limiting the options going forward.

"With today's rate adjustment, the SNB is ensuring that monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation," the central bank said.

The SNB said it expects GDP growth of between one percent and 1.5 percent for 2025, and around 1.5 percent for 2026.

Most Swiss economists expected the SNB to lower its key interest rate again.

Adrian Prettejohn, Europe economist at the London-based research group Capital Economics, thought the SNB rate cut "will be the last in this cycle" and rates will stick on 0.25 percent "for the foreseeable future".

Karsten Junius, chief economist at the Swiss private bank J. Safra Sarasin, said the need for another cut "has become less likely".

"The SNB could therefore be the first major central bank to have finished cutting rates after being the first one to start cutting back in March 2024," he said.

The Federal Reserve has pencilled in two rate cuts this year but held steady again on Wednesday and warned of increased economic uncertainty as it seeks to navigate an economy unnerved by Trump's stop-start tariff rollout.

M.Fujitav--JT