Swiss central bank cuts interest rates to zero per cent
The Swiss National Bank cut interest rates to zero per cent on Thursday as inflation cools and the franc strengthens, while the economic outlook has deteriorated.
The SNB, however, held off a decision to return to its era of negative rates — a policy that helped to curb the Swiss franc's rise but was unpopular among pension funds and other investors.
The franc's movement is also under scrutiny in the United States, as the US Treasury Department added Switzerland to its watch list of countries likely to manipulate their currencies earlier this month.
The Bank of England kept its key interest rate at 4.25 per cent on Thursday and Norway's central bank announced a surprise cut by a quarter point to 4.25 per cent.
The decisions came a day after the US Federal Reserve maintained its benchmark borrowing costs unchanged, citing concerns over high inflation and slowing growth in the world's biggest economy.
Gloomy outlook
The SNB said its interventions in the foreign exchange market were not aimed at increasing the Swiss economy's competitiveness, but rather were attempts to ensure price stability.
The Swiss currency is a safe haven investment that has climbed against the dollar since US President Donald Trump announced tariffs on imports in April.
In Thursday's statement, the SNB — which has denied manipulating the franc — said it was still 'willing to be active in the foreign exchange market'.
The SNB cited easing inflationary pressure in its decision to cut rates by a quarter point, but it also pointed to a gloomy economic forecast.
'The global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions,' the central bank said, adding that the outlook for Switzerland remained uncertain.
Karsten Junius, chief economist at the Swiss private bank J. Safra Sarasin, said it would 'not have been the appropriate time' to surprise the markets, and might even have 'harmed the SNB's standing' to do so.
Cooling inflation
The SNB said Swiss gross domestic product growth was strong in the first quarter of the year — largely due to exports to the United States being brought forward ahead of Trump's tariff manoeuvres.
But stripping that factor out, growth was more moderate, and is likely to slow again and remain subdued for the rest of the year, the SNB said.
The SNB expects GDP growth of one per cent to 1.5 per cent for 2025, and for 2026 too.
The bank lowered its inflation forecast for 2025 from 0.4 per cent to 0.2 per cent, and for 2026 from 0.8 per cent to 0.5 per cent.
Negative rates
Between 2015 and 2022, the SNB's monetary policy was based on a negative interest rate of minus 0.75 per cent — which increased the cost of deposits held by banks and financial institutions relative to the amounts they were required to entrust to the central bank.
Negative rates make the Swiss franc less attractive to investors as it reduces returns on investments.
Overnight, the Swiss franc was down 0.02 per cent against the dollar and up 0.10 per cent against the euro.
Adrian Prettejohn, Europe economist at the London-based research group Capital Economics, expected the SNB to move rates to negative 0.25 per cent at its September meeting due to deflation.
'There are also significant downside risks to inflation from trade tensions as well as heightened geopolitical uncertainty, which could push up the value of the franc further,' he said.
Following the SNB's announcement, the Swiss franc rose slightly against the dollar and the euro.
Switzerland's biggest bank UBS said it expected the SNB to keep its rate at zero per cent for the coming 12 months, and said the central bank's statement suggested it was 'not particularly worried about the current level of the Swiss franc exchange rate'.
Kathleen Brooks, research director at the XTB trading platform, said that if the SNB wanted a weaker currency it was 'going to have to intervene directly in the foreign exchange market and sell francs, or it will have to reinstall a peg and defend the level it wants to achieve'.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Perth Now
an hour ago
- Perth Now
Stocks struggle, oil up as Trump weighs US move on Iran
Share markets in Asia struggled for direction as fears of a potential US attack on Iran hung over markets, while oil prices were poised to rise for a third straight week on the escalating Israel-Iran conflict. Overnight, Israel bombed nuclear targets in Iran, and Iran fired missiles and drones at Israel as a week-old air war intensified with no sign yet of an exit strategy from either side. The White House said President Donald Trump will decide in the next two weeks whether the US will get involved in the Israel-Iran war. The US President is facing uproar from some of his MAGA base over a possible strike on Iran. Brent fell 2 per cent on Friday to $77.22 per barrel, but is still headed for a strong weekly gain of 4 per cent, following a 12 per cent surge the previous week. "The 'two-week deadline' is a tactic Trump has used in other key decisions, including those involving Russia and Ukraine, and tariffs," said Tony Sycamore, analyst at IG. "Often, these deadlines expire without concrete action, (similar to TACO), and there is certainly a risk of this happening again, given the complexities of the situation." Still, a cautious mood prevailed in markets with Nasdaq futures and S&P 500 futures both 0.3 per cent lower in Asia. US markets were closed for the Juneteenth holiday, offering little direction for Asia. The MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.1 per cent but was set for a weekly drop of 1 per cent. Japan's Nikkei slipped 0.2 per cent. China's blue chips rose 0.3 per cent, while Hong Kong's Hang Seng gained 0.5 per cent, after the central bank held the benchmark lending rates steady as widely expected. In the currency markets, the dollar was on the back foot again, slipping 0.2 per cent to 145.17 yen after data showed Japan's core inflation hit a two-year high in May, which kept pressure on the Bank of Japan to resume interest rate hikes. Investors, however, see little prospects of a rate hike from the BOJ until December this year, which is a little over 50 per cent priced in. The US bond market, which was also closed on Thursday, started trading in Asian hours on a subdued note. Ten-year Treasury bond yield was flat at 4.389 per cent, while two-year yields slipped 2 basis points to 3.925 per cent. Overnight, the Swiss National Bank cut rates to zero and did not rule out going negative, while the Bank of England held policy steady but saw the need for further easing and Norway's central bank surprised everyone and cut rates for the first time since 2020. Gold prices eased 0.2 per cent to $3,363 an ounce, but were set for a weekly loss of 2 per cent.
The Australian
2 hours ago
- The Australian
Smaller banks offering lowest home loan interest rates after RBA rate cuts: canstar
Making one simple change could save tens of thousands of dollars, and that's even before making extra repayments or throwing money into an offset account. The average owner-occupier variable home loan rate is now at 5.8 per cent, comparison group Canstar estimates. So if you're on that rate or above, and especially if you're in the early years of a 30-year mortgage, it might be time to shop around for a better deal. To give you an idea of what you could be paying, the lowest variable offering currently in the market is 5.34 per cent. For first home buyers it's even lower at 5.24 per cent. Who's offering the best rates? Smaller banks and non-bank lenders are offering the most competitive rates. Non-bank lender Pacific Mortgage Group is leading the pack with its 5.34 per cent variable loan but there are plenty of others sitting just slightly higher, per the table below. Again, keep in mind that Horizon's offering is only for first-home buyers. All up, eight lenders are currently offering rates of 5.39 per cent, including People's Choice, RACQ Bank and Australian Mutual, while a handful more have rates as low as 5.44 per cent. All up, 34 lenders now offer at least one variable rate under 5.5 per cent, according to Sally Tindall, head of research at Canstar. 'If your rate's above 5.8 per cent, alarm bells should be ringing. That's just the average, it's not even competitive,' she says. If you're keen to stick with the big four banks, CBA, Westpac and ANZ are currently offering variable rates of 5.59 per cent, while NAB is the outlier at 5.94 per cent. These are the advertised rates but there's often wriggle room for the bank to do a better deal if, for example, your loan-to-value ratio is particularly low. For those looking at fixed rates, there's a handful offering just under 5 per cent. But the cash rate is widely expected to fall further in the near term, meaning variable rates will continue to drop. Refinancing options Do-it-yourself refinancing, that's dealing with the bank yourself rather than through a broker, can be a bit of a pain and time consuming but it can also pay off. Your broker isn't always going to tell you the absolute lowest rates on the market, only the ones they can get for you. But if you've got a broker who can get you a competitive rate, it means they do all the legwork and you don't have to spend hours calling up each lender to get the best deal. Keep in mind, broker or not, switching lenders comes with fresh credit checks and invasive financial questions, as well as refinance fees that can range from $500 to $2000. There's also the risk that you refinance and the Reserve Bank cuts rates but your new lender doesn't pass the cuts on. We may not see this in the current cycle, especially since Treasurer Jim Chalmers was straight onto the banks in February ordering them to pass the RBA cut on, but it's a risk to be aware of. If you can't get a lender to give you a rate near the lowest in the market (5.34 per cent), getting it down from say, 6 to 5.5 per cent, will still mean a big saving. But there are traps to watch for, including the impact of stretching out your loan term back to 30 years. Crunching the numbers for The Australian, Canstar has come up with a couple of scenarios that illustrate the point. A borrower with a $600,000 home loan and 25 years left on their mortgage who refinances to 5.5 per cent and keeps their current loan term will potentially save almost $52,000 in interest. But if that same borrower extended the loan term back out from 25 to 30 years, their monthly repayments would drop by $459 but over the life of the loan they'd actually end up paying $55,000 more than if they'd done nothing at all. Canstar's scenario assumes there's two more RBA rate cuts (which we expect this year), bringing the cash rate to a neutral 3.35 per cent. It also assumes the banks pass on these cuts. No frills, digital only Other offerings in the market to look at are the no-frills, digital-only products like CBA's digi home loan and digital bank Up, which is backed by Bendigo Bank. CBA's digi home loan rate for owner-occupiers is at 5.59 per cent while its offering for investors is a competitive 5.69 per cent. Unloan, another digital-only offering backed by CBA is even lower, at 5.49 per cent. Like other lenders, CBA has seen a pick-up in customers looking to refinance since the RBA kicked off its rate-cutting cycle in February, according to its executive general manager for home buying, Dr Michael Baumann. 'It's a good trigger for customers to look at the interest rate they're paying and figure out whether they're on a good deal,' Baunmann says. The bank has seen a doubling of applications on the digital home loan product in the past year. And in a sign of an increasingly competitive market, CBA recently slashed its rates more than the RBA's 0.25 per cent May rate cut. Over the past six weeks the rate for owner occupiers has come down 31 basis points, while for investors it's down 43 basis points. With market watchers tipping two more RBA rate cuts in the next few months, if you get your lender down to a rate of 5.49 or less before the next cut you could be looking at a rate that starts with a 4 within a few months. Business The latest surge in Bitcoin, along with big players making investments in the sector, is retesting interest in the mysterious asset class. But is it for you? Business From July 1 the way the ATO enforces unpaid debts is changing. For some, it means their interest bill is poised to double.
News.com.au
2 hours ago
- News.com.au
Top 10 at 11: ASX plunges 0.31pc in first hour of trade
Morning, and welcome to Stockhead's Top 10 (at 11… ish), highlighting the movers and shakers on the ASX in early-doors trading. With the market opening at 10am sharp eastern time, the data is taken at 10.15am, once trading kicks off in earnest. In brief, this is what the market has been up to this morning. ASX flashes red across the board It's been building over the last couple of days, but Aussie traders have officially had enough of the chaos, and they're pulling back sharply in the first hour of trade this morning. After small dips over the last week or so, the ASX has finally pulled back into a correction, losing 0.31%. The sectors are all in the red except energy, but that's barely worth a mention at +0.01% as of about 10:30 am AEST. The All Ords Gold index is also slightly up, adding just 0.04%, but otherwise it's a sea of negatives on the market this morning. We're not alone – European markets fell to month lows last night, and while the US was closed for the Juneteenth holiday, futures are predicting near full percentage point plunges for the S&P500 and Nasdaq tomorrow. As Eddy Sunarto reported this morning, the global economy is teetering on the edge as we wait to see if US President Donald Trump will involve the US directly in the Israel-Iran conflict. In the meantime, let's see who's making moves on the ASX. WINNERS Code Name Last % Change Volume Market Cap SKN Skin Elements Ltd 0.003 50% 337063 $2,150,428 RNX Renegade Exploration 0.004 33% 71227 $3,865,090 AUK Aumake Limited 0.0025 25% 176755 $6,046,718 FIN FIN Resources Ltd 0.005 25% 100000 $2,779,554 GGE Grand Gulf Energy 0.0025 25% 1453193 $5,640,850 ALR Altairminerals 0.003 20% 312349 $10,741,860 BLU Blue Energy Limited 0.006 20% 628542 $9,254,868 BNL Blue Star Helium Ltd 0.006 20% 252223 $13,474,426 PV1 Provaris Energy Ltd 0.012 20% 479226 $6,980,013 DXN DXN Limited 0.055 17% 281887 $14,039,071 In the news... Hydrogen compression and shipping solution company Provaris Energy (ASX:PV1) has teamed up with global shipping leader 'K' LINE. K LINE, otherwise known as Kawasaki Kisen Kaisha, will provide technical, commercial and operation support, offering its extensive global shipping expertise as PV1 develops its hydrogen transport and storage model. PV1's main focus is the proprietary H2Neo Carrier and H2Leo Barge, which offer a combination of offshore compression, storage and shipping solutions for hydrogen gas transportation. LAGGARDS Code Name Last % Change Volume Market Cap BCB Bowen Coal Limited 0.195 -44% 331897 $37,715,145 RLC Reedy Lagoon Corp. 0.001 -33% 135000 $1,165,060 RPG Raptis Group Limited 0.115 -28% 123036 $56,109,577 EEL Enrg Elements Ltd 0.0015 -25% 532818 $6,507,557 DRE Dreadnought Resources 0.009 -25% 31724505 $60,954,000 WEC White Energy Company 0.035 -20% 113 $13,711,276 OMG OMG Group Limited 0.004 -20% 900000 $3,641,474 OVT Ovanti Limited 0.002 -20% 52423 $7,513,788 VRC Volt Resources Ltd 0.004 -20% 63043 $23,423,890 AMS Atomos 0.005 -17% 7147 $7,290,111 In the news... Bowen Coking Coal (ASX:BCB) has signalled it's considering placing the Burton Mine Complex operation into a temporary pause if an effort to transition the project to an owner-operator model is unsuccessful. The company is exploring a range of options to fund the transition plan and provide immediate liquidity, but the most recent Resources and Energy Quarterly forecasts falling demand for met coal as low emissions steel production gains pace. Dreadnought Resources (ASX:DRE) hit gold in 20 of 46 drill holes over various prospects at the Mangaroon gold project in WA, but results of up to 6m at 22.9 gold from 12m of depth weren't enough to wow investors. Some of that disappointment can be explained by a lack of results at the Lead Mine and Two Peaks prospects, where DRE hit nothing of consequence and will need to review its drill orientation.
