The Swiss National Bank cut interest rates today, maintaining the central bank's position as a frontrunner in the global policy easing cycle now underway, sending the Swiss franc lower and stocks higher.
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.
The decision had been finely balanced, given a recent rebound in economic growth and a break in the trend of gently falling inflation in Switzerland.
"The underlying inflationary pressure has decreased again compared to the previous quarter," the SNB said.
"With today's lowering of the SNB policy rate, the SNB is able to maintain appropriate monetary conditions," it said.
"Taking into account today's policy rate cut, the new conditional inflation forecast is similar to that of March. Over the longer term, it is slightly below the previous forecast," he added.
Before the decision, markets priced in a 68% likelihood of a cut, with a 32% probability for rates to remain unchanged.
On a busy day for central banks today, the Bank of England also kept UK rates unchanged.
Norway's central bank also held its policy interest rate at a 16-year high of 4.5% today, as unanimously expected by analysts, and postponed the prospect of a rate cut until 2025 from a previous plan to reduce borrowing costs in September this year.
Today's Swiss decision came after the inflation in the country remained steady at 1.4% in May, meaning price rises have come within the SNB's 0-2% target band, which it calls price stability, for each of the last 11 months.
Various factors lie behind Switzerland's low price pressures including an energy mix that makes the country less exposed to soaring oil and gas costs, wage restraint, and some protection against imported price inflation from the strong franc.
The recent downturn in inflation allowed the SNB to become the first major central bank to cut rates in March.
Since then the SNB has been followed by the European Central Bank, which last week cut interest rates for the first time in five years.
The central banks of Canada and Sweden have also started to unwind rate cuts introduced to tackle the post-pandemic inflation surge.
The US Federal Reserve last week, however, held rates steady and pushed out the start of rate cuts to later this year.
The recent strengthening of the Swiss franc against the euro may have been a factor in the SNB decision to maintain its cuts.
"Markets started to worry about France debt and the upcoming elections in France, which may have become a factor for the SNB which does not want the franc to appreciate too much," said UBS economist Alessandro Bee, who had expected the SNB to hold rates before cutting in September.
"The potential for further rate cuts is becoming more limited, as we get nearer to what we think is the nominal neutral level for rates of about 1%," he added.
