Swiss National Bank surprised market by 25 basis points interest rate cut

The Swiss National Bank cut its main interest rate by 25 basis points to 1.50%, against wide expectations to keep rates on hold at 1.75%.

Surprise decision made the SNB the first major central bank to start easing tighter monetary policy, aimed at bringing inflation under control, and SNB’s first rate cut in nine years. Swiss franc was sharply lower across the board in immediate reaction to the central bank’s decision. 

Rate cut comes after Swiss inflation dipped to 1.2% in February, the ninth month in succession that inflation had stayed within the SNB’s 0%-2% target range, which points to price stability. 

The central bank sees the decision to start easing monetary policy appropriate because the fight against inflation over the past two and a half years has been effective, as inflation has returned to the target range and is expected to remain within the range over next few years.

The SNB also said that price stability and lower interest rates will provide fresh tailwinds to economic activity.