Switzerland: the SNB sharply lowers its key rate to 0.5%

It was expected, but perhaps not of this magnitude so quickly. On Thursday, the Swiss National Bank decided to drop its key rate from 1% to 0.5%, a fairly sharp drop of 0.5 points. “Inflationary pressure has decreased again compared to the previous quarter. With the easing of monetary policy decided today, the National Bank is taking this development into account,” she explains.

The SNB had already lowered its rate several times in recent quarters, noting that inflation was falling more sharply than expected. She was expected to do this again today. But in June and September of this year, the drop was 0.25 points. This Thursday, she therefore wanted to strike harder. Philipp Merkt, chief financial officer of PostFinance, describes the decision as “rather surprising, but useful in the face of a too strong franc”.

“Since the last review, inflation has again fallen more than expected. From 1.1% in August, it rose to 0.7% in November,” notes the National Bank. On the other hand, growth remains weak, and this is where the SNB’s decision must have its effects, by strengthening economic activity. Especially since, with geopolitical tensions and the election of Donald Trump, the future is tinged with doubts. “As with the global economy, the forecast for Switzerland is surrounded by significant uncertainty,” notes the SNB.