Swiss Central Bank Lowers Policy Rate By 25 Bps

(RTTNews) - The Swiss National Bank lowered its key policy rate by 25 basis points for the second consecutive meeting on Thursday, citing easing underlying inflationary pressures.

The policy board headed by Thomas Jordan decided to cut the policy rate to 1.25 percent from 1.50 percent. The new rate will take effect on June 21.

The bank had unexpectedly reduced its rate by a quarter point at the March meeting and became the first major central bank to ease the policy in the current cycle.

Banks' sight deposits held at the central bank will be remunerated at the SNB policy rate up to a certain threshold, and at 0.75 percent above this threshold, the bank said today.

"With today's lowering of the SNB policy rate, the SNB is able to maintain appropriate monetary conditions," the bank said.

The SNB repeated that it is willing to be active in the foreign exchange market as necessary.

Capital Economics' economist Adrian Prettejohn said the SNB is unlikely to cut rates again this year as inflationary pressures remain quite sticky.

The bank downgraded inflation projections for the forecast period due to somewhat lower second-round effects. The inflation outlook for this year was trimmed to 1.3 percent from 1.4 percent and that for 2025 was lowered to 1.1 percent from 1.2 percent.

The outlook for 2026 was reduced to 1.0 percent from 1.1 percent.

Regarding economic growth, the SNB said gross domestic product is set to grow around 1 percent this year. Unemployment is likely to continue to rise marginally and the utilization of production capacity is expected to decline slightly. For next year, the bank projected economic growth of around 1.5 percent supported by somewhat stronger demand from abroad.