By Ed Frankl


The Swiss National Bank unexpectedly cut its key interest rate Thursday, becoming the first central bank from a rich, advanced economy to make such a move since inflation rates began to ease from a postpandemic surge.

Central banks in many developed economies have been signaling over recent months that interest-rate cuts are on their way, and the SNB's decision will likely heighten speculation about the timing of other moves.

Federal Reserve officials confirmed they expect to cut interest rates three times this year, after the central bank held its benchmark rate on Wednesday.

Meanwhile, European Central Bank President Christine Lagarde indicated that the bank would lower its key interest rate in June if upcoming data on inflation and wages are in line with its projections. Norges Bank and the Bank of England are both expected to hold their respective interest rates later Thursday.

With inflation now well within the SNB's target range, the bank cut its key rate to 1.5% from 1.75%, where it had been since June. Inflation is now expected below 2% over the next few years, having been 1.2% in February, the SNB said.

Although its inflation rate was never close to the double-digit level of the neighboring eurozone, consumer prices in Switzerland picked up following Russia's full-scale invasion of Ukraine in 2022.

"The easing of monetary policy has been made possible because the fight against inflation over the past two-and-a-half years has been effective," the SNB said.

The news comes after the bank's Chairman Thomas Jordan said last month that he would leave the bank in September.

The SNB is far from being the first central bank to lower its key interest rate in recent months. Policymakers in many developing economies have reduced borrowing costs, having been quicker to raise them when consumer prices began to surge from early 2021. Brazil's central bank on Wednesday lowered its key rate for the sixth time since August 2023.

Economists expected the SNB to wait until its next meeting in June to cut interest rates. The central bank has long been wary of allowing the Swiss franc to appreciate too much against the euro, since that would weaken the country's exports to its largest market. But with investors anticipating a cut by the ECB in June, the risk of moving early has been reduced.

Policymakers may also be eager to kick start Switzerland's economy, with economic growth only expected to rise by a below-average 1% in 2024, according to fresh SNB forecasts.

The first cut by a central bank in a rich, advanced economy comes in the same week as the most recent rise, with the Bank of Japan ending its run of negative rates.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

03-21-24 0506ET