The Swiss National bank on Thursday trimmed its key interest rate by a further 25 basis points as the country’s economy grapples with depressed inflation.
“With today’s rate adjustment, the SNB is ensuring that monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation,” the SNB said in a statement.
The bank will continue to closely follow the situation and make further adjustments to monetary policy if needed “to ensure that inflation remains within the range consistent with price stability over the medium term.”
The move takes the bank’s main rate to 0.25%. The cut was widely anticipated, with traders previously pricing in an over 70% chance of a quarter-point reduction.
It follows a 50-basis-point cut announced by the central bank in December, which at the time exceeded expectations. That also marked the fourth interest rate reduction from the SNB since Switzerland became the first major economy to ease monetary policy in March of last year.
The rate decision comes as Swiss inflation fell to an almost four-year low of 0.3% on an annual basis in February, according to official figures. The Federal Statistics Office cited cheaper imports as a key factor contributing to the low inflation figure.
The SNB on Thursday said inflation had developed as expected since its previous monetary policy assessment.
“The new conditional inflation forecast has hardly changed since December. Without today’s rate cut, the forecast would have been lower in the medium term,” the central bank added, saying that its inflation forecast was within the range of price stability in the medium term.
The SNB expects inflation to average 0.4% in 2025.
Stefan Gerlach, chief economist at EFG Bank, said that the SNB had been expecting inflation to ease to this level, saying that “it’s sort of panning out the way the SNB thought it would.”
“I think a cut now is warranted to make sure that inflation doesn’t go too low,” he told CNBC’s Carolin Roth.
The Swiss franc weakened slightly after the SNB’s rate decision, with the euro last up 0.06% against the franc. The franc is widely seen as a safe haven currency at times of political turmoil and uncertainty in the euro zone and has broadly remained strong even as the SNB has lowered interest rates.