The Swiss National Bank (SNB) enacted its most significant interest rate cut in nearly a decade on Thursday, slashing its policy rate by 50 basis points from 1.0% to 0.5%. The move aims to stay ahead of anticipated rate reductions by other central banks and to manage the Swiss franc’s appreciation.

The decision surprised many, as over 85% of economists in a recent survey had predicted a smaller cut of 25 basis points.

This adjustment represents the sharpest drop in borrowing costs since the SNB’s emergency rate cut in January 2015, which followed its decision to abandon the minimum exchange rate with the euro.

The Swiss National Bank said, “Underlying inflationary pressure has decreased again this quarter. The SNB’s easing of monetary policy today takes this development into account.”

The SNB stated it would “continue to monitor the situation closely” and is ready to adjust its monetary policy as necessary to keep inflation within its target range for medium-term price stability.

This rate adjustment is the first under new SNB Chairman Martin Schlegel, marking a shift from the approach of former chairman Thomas Jordan, who implemented three 25 basis point cuts earlier this year.

The decision is supported by Swiss inflation, which was 0.7% in November and has remained within the SNB’s target range of 0-2% since May 2023.

Meanwhile, the European Central Bank is expected to announce a rate reduction later on Thursday, followed by a similar move from the U.S. Federal Reserve on December 18.

Moreover, the Bank of Canada also reduced their main policy rate by 50 basis points on Wednesday, reflecting a trend of easing monetary policy across various economies.

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