Prime Rates: Switzerland Also Decides to Cut

Switzerland is also loosening its monetary policy following similar decisions by the Federal Reserve (Fed) and the European Central Bank (ECB): the Swiss central bank (Swiss National Bank, SNB) has decided to cut its benchmark rate by 0.25%, bringing it to 1 percent.

The decision, announced by the SNB after a quarterly analysis of the Swiss Confederation’s economic and monetary situation, was in line with analysts’ expectations, who did not rule out an even larger 0.5% rate cut to follow the Federal Reserve’s monetary policy.

According to outgoing SNB management president Thomas Jordaan (pictured), the Swiss central institute’s decision is aimed at “countering upward pressure on the Swiss currency.” As noted by Swiss radio and television, “while the strong franc was a boon in times of galloping inflation because it cushioned the prices of goods imported from abroad, in times of falling inflation its function recedes into the background, and in times of difficulty, the export industry, faced, for example, with a low euro exchange rate, finds itself in the spotlight.”

“Further interest rate cuts may be needed in the coming quarters to ensure medium-term price stability,” Jordaan went on to say, paving the way for further declines. “We also reiterate our readiness to act, if necessary, in the foreign exchange market,” emphasized the SNB president, who will leave his post at the end of the month.