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The SNB explained in a communiqué on Thursday that inflationary pressure in Switzerland had once again fallen significantly compared to the previous quarter. The Swiss interest rate adjustment follows a 0.5% cut by the United States Federal Reserve last week.

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Further interest rate cuts may be necessary in the coming quarters in order to ensure price stability in the medium term, said the central bank of Thursday. The Swiss central bank has reduced its inflation forecast to 1.2% this year and 0.6% in 2025, which is lower than the 1.3% and 1.1% predictions in June.

At the same time, the SNB is still prepared to be active on the foreign exchange market if necessary to defend the Swiss franc against appreciation.

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“[GDP] Growth is likely to remain rather modest in Switzerland in the coming quarters due to the recent appreciation of the Swiss franc and the moderate development of the global economy,” the SNB stated, as it forecast 1% economic growth this year.

The SNB had already lowered the key interest rate by 0.25 percentage points in both March and June.

In response to rising inflation, the central bank had previously raised the key interest rate from -0.75% to 1.75% in just five steps from June 2022 and then left it unchanged twice.

Translated from German by DeepL/mga