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Swiss National Bank has cut interest rates, but it did not go so far as negative rates, as it fights to control its currency, which has increased on global trade stress.
The quarterly-point reduction was estimated by economists on Thursday by the Central Bank’s Governing Board.
This is the first time that the Alpine country, which is one of the few to experiment with negative rates, has gone to a zero interest rate as it deal with backward inflation and a growing Swiss frank, a shelter currency that investors have purchased between the business war of US President Donald Trump.
Swiss Frank strengthened after Thursday’s expected cut, flattened in the day against the dollar, with a greenback at SFR0.819.
This decision comes after annual inflation 0.1 percent minus in MayFirst negative reading in four years. Swiss Frank, who appreciates 10 percent against the dollar this year, has reduced the cost of imports, which accelerates disruptive pressure.
This year there is a complex policy formulation in the rapid growth of the so -called Swissi. SNB is trying to reduce pressure without triggering allegations of currency manipulation from America, which is kept Switzerland On a walchalist during Trump’s first term.
Analysts say the rate deduction is a diplomatic passage compared to direct FX intervention.
,[The central bank] It is estimated that the growth in the global economy will weaken on the quarters, “SNB said in a statement with Thursday’s decision.” Inflation in the US is expected to increase in the upcoming quarters. In Europe, on the contrary, inflation pressure and decrease are expected.
He said, “Inflation pressure has decreased compared to the previous quarter. With today’s monetary policy, SNB is combating low inflation pressure.”
Analysts of Capital Economics highlighted that there was no change in the language of the statement about FX interventions and there was no mention of Frank’s strength. He said, “It supports our view that SNB is never planning to use FX intervention as its main tool to loosen monetary policy,” he said.
Switzerland first introduced negative interest rates in December 2014, when owner Determine the deposit rate at minus 0.25 percent to stem Frank’s praise between safe-house flow.
In one phase, the Central Bank reduced the lowest level, minus 0.75 percent rate in the world. The policy remained for more than seven years, it also made one of the world’s longest negative rate period, until it excluded it in 2022.
Thursday’s deduction creates a possible difficult situation for Swiss banks. They no longer earns interest on their reserves with SNB, but theoretically customers are rationalized for passing that cost.
This is a developing story
