SNB cuts interest rate to zero in effort to stop franc inflows

The Swiss National Bank cut its interest rate to zero, seeking to deter investors from pushing up the franc.

- BASTIAN BENRATH-WRIGHT

The quarter-point reduction yesterday is the sixth consecutive move by officials, and was forecast by most of the economists surveyed by Bloomberg after the currency’s strength caused consumer prices to drop for the first time in four years. A minority anticipated an even bigger half-point step.

“With today’s easing of monetary policy, the SNB is countering the lower inflationary pressure,” the central bank said in a statement. “The SNB will continue to monitor the situation closely and adjust its monetary policy if necessary” it said, adding that it “remains willing to be active in the foreign exchange market as necessary.”

The cut underscores just how far US President Donald Trump's disruption to global trade is impacting Switzerland. President Martin Schlegel and colleagues had signalled as recently as March that they were probably finished with easing, but the currency’s role as a haven from turmoil forced their hand.

The Swiss franc rose as much as 0.2% to the day’s high of 0.9387 versus the euro after the announcement. Since April, the haven currency has traded in range of a decade high around 0.92, benefiting from demand induced by the broad selloff in the dollar. Against a basket of currencies, the franc has gained nearly 2% so far this year.