BRUSSELS (dpa-AFX) - The Swiss National Bank reduced its policy rate to zero on Thursday as inflation turned negative and the currency strengthened further amid global trade tensions.
The bank decided to lower the SNB policy rate by 0.25 percentage points to zero percent. This was the sixth consecutive reduction.
The bank has reduced the key rate by 175 basis points since March 2024. The bank had exited its negative rate in 2022 after holding it for over seven years.
President Martin Schlegel said the board is bringing the interest rate to the verge of negative territory.
The bank today said the sight deposits held at the SNB will be remunerated at the policy rate up to a certain threshold. The discount for sight deposits above this threshold remained unchanged at 0.25 percentage points.
'Inflationary pressure has decreased compared to the previous quarter,' the bank said. 'With today's easing of monetary policy, the SNB is countering the lower inflationary pressure,' SNB added.
Inflation turned negative in May due to the developments of prices in tourism and for oil products.
The bank halved its inflation outlook for 2025 to 0.2 percent from 0.4 percent and lowered the forecast for 2026 to 0.5 percent from 0.8 percent.
For 2027, inflation is seen at 0.7 percent, below the 0.8 percent projected in March.
Following the strong growth in the first quarter, the bank forecast economic growth to slow again and remain rather subdued over the remainder of the year. The bank expects the economy to grow in the range of 1 percent to 1.5 percent in 2025.
The bank cited the developments abroad continued to represent the main risk to the Swiss economic outlook.
'Unless the situation changes drastically between now and September, for example as a result of a sharp weakening of the Swiss franc or a very sharp rise in the price of oil products in Swiss francs, today's decision paves the way, in our view, for a further rate cut in September and a return to negative interest rates,' ING economist Charlotte de Montpellier said.
Although the SNB acknowledged the adverse effects of negative interest rates, it seems increasingly likely that it will have no choice but to move in this direction at its next meeting, the economist added.
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