Switzerland cuts interest rates for second time, major economies divided | Real Time Headlines

The Swiss National Bank cut its key interest rate by 25 basis points to 1.25% on Thursday, continuing to cut interest rates at a time when sentiment about monetary policy easing in major economies remains mixed.

Two-thirds of economists surveyed by Reuters expected The Swiss National Bank will decide to cut interest rates by 25 basis points to 1.25%.

The Swiss franc weakened following the news, The euro rose 0.3% and The dollar rose 0.5% Against the Swiss currency at 8:55 am London time.

Following Thursday’s decision, the SNB set its conditional inflation forecast at 1.3% in 2024, 1.1% in 2025 and 1.0% in 2026.

Inflation in the country Flat at 1.4% in May After April’s gains, the full-year 2024 average is expected to be the same, According to the latest forecasts from the Swiss National Bank.

The Swiss bank said it currently expects economic growth of about 1% this year and 1.5% in 2025, with unemployment expected to rise slightly and capacity utilization to fall slightly.

“In the medium term, economic activity should gradually improve, supported by stronger overseas demand,” the SNB said.

In an interview with CNBC reporter Silia Amaro, Thomas Jordan, chairman of the Swiss National Bank, emphasized the impact of inflation on the bank’s latest decision.

“Inflationary pressures have declined slightly, the Swiss franc has strengthened, and global uncertainty has increased. Therefore, we conclude that given these circumstances, it is best to lower interest rates by 25 basis points,” he said.

While emphasizing that the SNB’s most important tool is interest rates, Jordan said the bank is also prepared to intervene in the foreign exchange market if necessary.

“Significant fluctuations in the exchange rate could have an impact, or indeed a significant change, on the economic outlook for the world economy,” he noted. “The Swiss franc has appreciated to some extent compared to our last monetary meeting. The exchange rate There are implications for monetary conditions and we take that into consideration.”

Jordan confirmed that he will attend the SNB’s final monetary policy meeting in September before leaving his post that month.

Swiss interest rates have fallen sharply among G10 democracies, second only to Japan. it became The first major economy to cut interest rates Back in late March, earlier this month Next is the European Central Bankand now there are growing questions about whether there will be a third rate cut this year.

Ballinger Group foreign exchange market analyst Kyle Chapman said the SNB’s inflation forecast “suggests that some restrictive measures will still be in place this year, which to me is a heavy signal that September will Cut interest rates again.” “I expect the SNB to cut interest rates for a third time next quarter, with a fourth rate cut possible in December if conviction remains about the level of restraint in monetary policy.”

This prospect puts the Swiss franc in a “weak position”, he said.

An analysis report published by Capital Economics on Thursday disagreed with this view and said that under the current inflation situation, the Swiss National Bank is unlikely to cut interest rates further this year.

“Looking ahead, we do not think the SNB will cut rates again this year as we are now no longer convinced that underlying inflationary pressures are waning as labor wages are growing strongly and services inflation remains very troublesome,” the report stated.

Adrien Pichoud, chief economist at Syz Bank, also said that the Swiss National Bank “has now completed the readjustment of monetary policy and should not cut interest rates further this year.”

The Fed hasn’t blinked at a rate cut yet, and market participants will be watching later on Thursday If the Bank of England takes this step The Bank of England lowered its inflation target after UK inflation fell to the 2% target for the first time in nearly three years.