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New Straits Times
12 hours ago
- Business
- New Straits Times
Swiss National Bank cuts rates to zero as inflation turns negative, global risks mount
ZURICH: The Swiss National Bank (SNB) lowered its key interest rate to zero per cent on Thursday, citing weakening inflation, sustained strength in the Swiss franc, and growing uncertainty surrounding the global economic outlook. The SNB reduced its policy rate by 25 basis points from 0.25 per cent, in line with market expectations and a Reuters poll. It was the central bank's sixth straight cut since it began easing in March 2024. The move brings Switzerland back to the brink of negative interest rates, a policy last seen from 2014 to 2022, and one that was deeply unpopular with banks, savers, and insurers. "Inflationary pressure has decreased compared to the previous quarter. With today's easing of monetary policy, the SNB is countering the lower inflationary pressure," the central bank said in a statement. Swiss annual inflation turned negative in May for the first time in four years, slipping outside the SNB's target range of 0–2 per cent. Although the franc initially strengthened after the announcement, it later traded steady against the US dollar at 0.8191. In its baseline scenario, the SNB said it expects global economic growth to weaken in the coming quarters, with inflation rising in the United States but falling further in Europe. The bank also highlighted persistent risks due to potential increases in trade barriers and escalating geopolitical tensions. "The outlook for the world economy remains subject to high uncertainty," the SNB said, adding that stronger-than-expected fiscal support in some economies could offset the downside risks. Pressure from a strong franc The SNB's move comes amid a flurry of central bank decisions. Earlier Thursday, Norges Bank unexpectedly cut rates for the first time in five years, while the Bank of England is due to announce its decision later in the day. The US Federal Reserve held its policy rate steady on Wednesday, though signalled that rate cuts remain on the table later this year. The European Central Bank trimmed its own rate by 25 basis points earlier this month. "The SNB has cut rates because the franc is stronger and the economic outlook in Switzerland is weaker following the 'Liberation Day' tariffs," said Alessandro Bee, economist at UBS, referring to the sweeping trade tariffs introduced by US President Donald Trump in April. "The SNB wants to prevent a further appreciation of the franc, which could help Swiss exporters and also prevent inflation falling further." EFG senior economist GianLuigi Mandruzzato said that although May's inflation decline was modest, the real impact of the stronger franc on consumer prices would likely materialise in the coming months. He added that the SNB may now pause its rate cuts, barring a significant economic downturn. "All options remain on the table, including negative interest rates and foreign exchange market interventions," said Mandruzzato. "But for them to be deployed, a further, meaningful deterioration of the outlook would be needed." Two-year Swiss government bond yields remain in negative territory, signalling that markets expect the SNB may dip below zero in the coming months. The franc has gained around 11 per cent against the dollar so far in 2025, as risk-averse investors piled into safe-haven assets. This has had a disinflationary effect by reducing the cost of imported goods. Although the SNB has left the door open for foreign exchange interventions, the US Treasury Department recently added Switzerland to its watchlist of countries being monitored for potential currency manipulation. "The SNB's main concern may not be avoiding the impression of being a currency manipulator," said Karsten Junius, chief economist at J. Safra Sarasin. "Still, it is politically wise not to appear too trigger-happy to go negative with the policy rate."
Time of India
13 hours ago
- Business
- Time of India
Swiss National Bank cuts interest rates to zero as inflation falls
The Swiss National Bank cut its interest rate to zero on Thursday in response to falling inflation, appreciation pressure on the Swiss franc and economic uncertainty caused by the U.S. administration's unpredictable trade policy. The SNB reduced its policy rate by 25 basis points from 0.25%, as expected by markets and a Reuters poll. It was the central bank's sixth rate cut in succession after it started reducing borrowing costs in March 2024. The central bank now stands on the brink of returning to negative interest rates , a policy it maintained from 2014 to 2022, but which was unpopular with banks, savers and insurance companies. "Inflationary pressure has decreased compared to the previous quarter. With today's easing of monetary policy, the SNB is countering the lower inflationary pressure," the central bank said in a statement. The Swiss franc briefly strengthened after the decision, but retreated to trade steady on the day against the dollar a 0.8191 francs. In its baseline scenario, the SNB said it anticipated that growth in the global economy would weaken over the coming quarters, while U.S. inflation was likely to rise. In Europe, by contrast, a further decrease in inflationary pressure is to be expected, it said. The Swiss move comes on a busy day for central banks, with the Bank of England and Norway's central bank also due to announce their rate decisions. On Wednesday, the U.S. Federal Reserve held its interest rates steady and signalled borrowing costs could fall later this year, while the European Central Bank trimmed its interest rate by 25 basis points earlier this month. The SNB's rate cut came after Swiss annual inflation in May turned negative for the first time in four years, missing the central bank's 0-2% target range. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Undo "The SNB has cut rates because the franc is stronger and the economic outlook in Switzerland is weaker following the 'Liberation Day' tariffs," said UBS economist Alessandro Bee, referring to sweeping tariffs U.S. President Donald Trump announced in April. "The SNB wants to prevent a further appreciation of the franc, which could help the Swiss exporters and also prevent inflation falling ever further." Although inflation was only slightly negative in May, the full impact of the rising franc on prices will only be seen in the next few months, said EFG economist GianLuigi Mandruzzato. Live Events Mandruzzato said the SNB would now probably pause its rate cuts, unless there was a significant downturn in the Swiss economy caused by higher U.S. tariffs. "They would be really happy to avoid going into negative interest rates," he said. "For that to happen you would really need to see a real risk of deflation, with inflation lower than -0.5% for several months." However, Switzerland's rate-sensitive two-year bond yield remained in negative territory, a sign that markets still anticipate a move in Swiss rates below 0% in the months ahead.
Yahoo
13 hours ago
- Business
- Yahoo
Swiss National Bank cuts interest rates to zero as inflation falls
By John Revill ZURICH (Reuters) -The Swiss National Bank cut its interest rate to zero on Thursday in response to falling inflation, appreciation pressure on the Swiss franc and economic uncertainty caused by the U.S. administration's unpredictable trade policy. The SNB reduced its policy rate by 25 basis points from 0.25%, as expected by markets and a Reuters poll. It was the central bank's sixth rate cut in succession after it started reducing borrowing costs in March 2024. The central bank now stands on the brink of returning to negative interest rates, a policy it maintained from 2014 to 2022, but which was unpopular with banks, savers and insurance companies. "Inflationary pressure has decreased compared to the previous quarter. With today's easing of monetary policy, the SNB is countering the lower inflationary pressure," the central bank said in a statement. The Swiss franc briefly strengthened after the decision, but retreated to trade steady on the day against the dollar a 0.8191 francs. In its baseline scenario, the SNB said it anticipated that growth in the global economy would weaken over the coming quarters, while U.S. inflation was likely to rise. In Europe, by contrast, a further decrease in inflationary pressure is to be expected, it said. The Swiss move comes on a busy day for central banks, with the Bank of England and Norway's central bank also due to announce their rate decisions. On Wednesday, the U.S. Federal Reserve held its interest rates steady and signalled borrowing costs could fall later this year, while the European Central Bank trimmed its interest rate by 25 basis points earlier this month. The SNB's rate cut came after Swiss annual inflation in May turned negative for the first time in four years, missing the central bank's 0-2% target range. "The SNB has cut rates because the franc is stronger and the economic outlook in Switzerland is weaker following the 'Liberation Day' tariffs," said UBS economist Alessandro Bee, referring to sweeping tariffs U.S. President Donald Trump announced in April. "The SNB wants to prevent a further appreciation of the franc, which could help the Swiss exporters and also prevent inflation falling ever further." Although inflation was only slightly negative in May, the full impact of the rising franc on prices will only be seen in the next few months, said EFG economist GianLuigi Mandruzzato. Mandruzzato said the SNB would now probably pause its rate cuts, unless there was a significant downturn in the Swiss economy caused by higher U.S. tariffs. "They would be really happy to avoid going into negative interest rates," he said. "For that to happen you would really need to see a real risk of deflation, with inflation lower than -0.5% for several months." However, Switzerland's rate-sensitive two-year bond yield remained in negative territory, a sign that markets still anticipate a move in Swiss rates below 0% in the months ahead. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
13-05-2025
- Business
- Bloomberg
Swiss Outlook Cut at UBS With Warning on Trump's Pharma Push
UBS Group AG cut its forecast for expansion in Switzerland this year and warned that Donald Trump's pressure on drugmakers poses a long-term threat to one of its biggest drivers of growth. Economists Alessandro Bee and Florian Gemanier now expect gross domestic product adjusted for large sport events to grow by 1% in 2025, down from a prior outlook of 1.5%, as the US president's attempt to rewire global trade hits a country still dependent on exports for its prosperity.
Yahoo
24-04-2025
- Business
- Yahoo
Gold price rise adds shine to Swiss National Bank results
ZURICH (Reuters) - The Swiss National Bank said on Thursday it posted a first quarter profit of 6.7 billion Swiss francs ($8.08 billion), as surging gold prices compensated for stock market declines and the rising Swiss franc. Gold was the star performer for the SNB, registering a valuation gain of 12.8 billion francs in the three months to the end of March. The central bank holds an unchanging amount of 1,030 tonnes of gold, whose value has shot up as dimming risk sentiment pushed investors into the precious metal. The gain compensated for a 5.3 billion franc loss the SNB from its foreign currency positions due to price losses on the stocks and bonds it holds. The figure was also reduced by exchange-related losses of 2.3 billion francs during the period, as the Swiss franc rose versus the dollar and euro. The result was towards the bottom end of a UBS forecast range for a first quarter profit of 5 to 15 billion francs. UBS economist Alessandro Bee estimates the SNB has lost 50 billion francs in the value of its assets since the end of March due to a rising franc and declines in U.S. bonds and equities following President Donald Trump's tariff announcements. "The rising price of gold is helping to offset this, but can only do so much, especially as gold is priced in dollars, which reduces the effect when converted into francs," he said. April's losses have more than wiped out the first quarter profit and would erase most of the retained profit from last year, putting pressure on the SNB's figures, he added. "The SNB will be hoping for a recovery in stock markets and also a decline in the franc if it wants to post a profit for 2025," said Bee. ($1 = 0.8287 Swiss francs)
