The Swiss National Bank Cuts Rate Target Midpoint by 50 Basis Points to 2.0%

November 6, 2008

Swiss monetary officials acted outside of a scheduled quarterly meeting for the second time in a month. The new LIBOR target range becomes 1.5-2.5%, with a point target of 2.0%. The Swiss on October 8th had implemented a 25-bp reduction, moving less than other central banks in that concerted move. The cyclical peak rate of 2.75% had been kept previously from September 13, 2007 until October 8, 2008 and had been reached following ten increases of 25 basis points each between June 2004 and September 2007.

On October 8th, Swiss officials had said that growth in their economy would be weaker next year than assumed in their most recent quarterly policy assessment made this past September. Today’s statement escalates that warning to admitting that “growth in 2009 might even be negative.” This recession, in conjunction with the appreciation of the franc and lower oil costs, reinforces “the expected drop in inflation.” As the ECB implements more rate reductions beyond today’s, so will the Swiss National Bank in order to guard against excessive exchange rate strength that could aggravate the downturn. Today’s statement by the SNB ends with a promise to keep a close watch on the franc’s movements.



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