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Why the Swiss central bank made a surprise cut to its key interest

Why the Swiss central bank made a surprise cut to its key interest

The Swiss National Bank (SNB) said on Thursday it is trimming its key interest rate, a surprise move that makes Switzerland the first major financial centre to announce a cut in recent months.

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Thomas Jordan, the outgoing SNB chairman, credited the central bank’s push to rein in inflation in the wealthy Alpine country. The cut of a quarter of a percentage point, to 1.5%, will apply as of Friday.

Jordan explained to reporters why they opted to trim the key rate now.

“The easing of our monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective,” he said.

“For some months now, inflation has been back below 2%, and thus in the range we equate with price stability,” Jordan added. “According to our new forecast, inflation is also likely to remain in this range over the next few years.”

The move, which Swiss media said caught some by surprise, had an almost immediate effect on the Swiss franc, which dropped in value against the euro. 

The franc was trading at 1.02 euros on Thursday, down from 1.03 euros a day earlier. In January, the Swiss currency was at all-time highs against the European currency.