The Swiss National Bank cut interest rates on Thursday, maintaining the central bank's position as a frontrunner in a global policy easing cycle now underway.
The SNB cut its policy rate by 25 basis points to 1.25%, as expected by two-thirds of analysts polled by Reuters, following a similar cut in March.
MARKET REACTION:
The euro was last up around 0.4% against the franc at 0.9540, rising off a roughly four-month low before the decision. The dollar climbed 0.62% to 0.88995 francs as the Swiss currency fell.
Switzerland's blue chip stock index (.SSMI) rose by as much as 0.58%, having been little changed before the announcement.
COMMENTS:
MAXIME BOTTERON, ECONOMIST, UBS, ZURICH:
"The SNB acknowledged a decline in underlying inflationary pressure, which appears to be the main reason for today's interest rate cut.
Somewhat surprisingly, the SNB did not mention the recent appreciation of the Swiss franc in its press release, suggesting that the franc appreciation was not the main reason for the rate cut.
With the latest rate cut, the policy rate is now closer to its terminal value, which we estimate at 1.00%. This means that the potential for additional cuts is limited, unless inflation decelerates sharply or the Swiss economy enters a recession."
ADRIAN PRETTEJOHN, EUROPE ECONOMIST, CAPITAL ECONOMICS, LONDON:
"We think that the SNB will not cut rates again this year as we are now no longer confident that underlying inflationary pressures are abating because labour compensation is growing at a strong rate and services inflation remains very sticky."
PETER VANDEN HOUTE, ECONOMIST, ING:
"With decent Swiss GDP growth in the first quarter there was no real urgency for the SNB to cut rates, but given the still benign inflation outlook the SNB saw a window to ease: for the SNB it was more a rate cut because it could, not because it should."
KARSTEN JUNIUS, CHIEF ECONOMIST, J SAFRA SARASIN, ZURICH
"As we expected, the SNB cut its policy rate, as underlying inflation has decreased again and the long-term inflation forecast was lowered again."
"One important trigger for the rate cut was likely that CPI ex rents dropped below 1% lately, while the economy is still operating below potential.
We expect another rate cut of 0.25% in September, which would bring monetary policy back to its neutral level."
GERO JUNG, CHIEF ECONOMIST, MIRABAUD, GENEVA
"We are not surprised by the SNB 25bp cut."
"This is in line with a continuation of a monetary easing cycle that started in March, based on 1/ well anchored inflation in Switzerland; 2/ in line with a global disinflation trend - that will continue, according to the SNB’s latest statement; 3/ current interest rates remain high, including in real terms - r* is centred around zero, as outlined by SNB President Jordan in a late May speech; 4/ this decision is time consistent."
"Given the decision in March to cut rates, why stop now? The SNB is in that respect consistent with its plan to turn towards a less restrictive monetary policy setting."
