Following its quarterly assessment of monetary policy on Thursday, The members of the Board of the Swiss National Bank (SNB) have decided to cut the reference interest rate on demand deposits by 25 basis points (bp), from 1.75% to 1.50%.
The decision surprised the markets.
Summary of the SNB statement
The impulse in mortgage and real estate markets has weakened noticeably in recent quarters. However, vulnerabilities remain in these markets.
Weak demand from abroad and the appreciation of the Swiss franc in real terms over the past year they are having a moderating effect.
In this environment, Unemployment is likely to continue gradually rising and that the utilization of production capacity decreases somewhat further.
Banks' demand deposits in the SNB will be remunerated at the official SNB interest rate up to a certain threshold, and at 1.0% above this threshold.
This scenario for the global economy continues to be subject to significant risks. Inflation could remain high for longer in some countrieswhich would require a more restrictive monetary policy than that foreseen in the reference scenario.
The SNB also remains ready to intervene in the foreign exchange market if necessary.
Market reaction to SNB interest rate decision
In a knee-jerk reaction to the SNB's unexpected decision to cut interest rates, the USD/CHF pair rose almost 100 pips to 0.8975 before retreating slightly to 0.8965, where it now falters. The pair is up 0.95% on the day.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
