The Swiss National Bank (SNB) lowered interest rates by 25 basis points on Thursday, marking its third reduction this year, mirroring similar actions taken by the European Central Bank and the US Federal Reserve to decrease borrowing costs.

The policy rate has now been set at 1.00%, the lowest it has been since early 2023, a decision anticipated by 30 out of 32 analysts in a Reuters poll.

Before the decision, markets had assigned a 55% probability to a 25-basis point cut.

This rate adjustment, which marks the final decision of SNB Chairman Thomas Jordan’s 12-year tenure, was made possible by the stabilisation of inflation in Switzerland, which slowed to 1.1% in August and has remained within the central bank's target range of 0-2% for the past 15 months, Reuters reports.

Over the past few weeks, the Swiss Franc has appreciated, reaching its highest level against the Euro in nine years in early August. This rise poses additional challenges for Switzerland's exporters.

“The SNB's easing of monetary policy today takes the reduction in inflationary pressure into account. Further cuts in the SNB policy rate may become necessary in the coming quarters to ensure price stability over the medium term,” the central bank said.

The SNB's recent rate cut aligns with similar monetary easing measures taken by the European Central Bank and the Federal Reserve earlier this month.

Thomas Gitzel, Chief Economist at VP Bank Group, noted that the SNB is anticipating a pronounced “disinflationary trend” in the coming months and described the bank's statement as “unusually clear” regarding its outlook by highlighting the possibility of future rate cuts.

Furthermore, Jordan recently stressed the Swiss central bank's success in combating inflation, which has positioned it as a leader among central banks in reducing borrowing costs, with rate cuts implemented in both March and June. 

He also recognised the challenges posed by the recent appreciation of the Franc for exporters, which bolsters expectations that further interest rate reductions, potentially weakening the safe-haven currency, could be forthcoming.

The Swiss Franc strengthened on Thursday following the announcement of the 25-basis-point rate cut.

The SNB revised its inflation forecast for 2024 down to 1.2%, compared to the previous estimate of 1.3% made in June. It also lowered its forecasts for 2025 to 0.6% from 1.1% and for 2026 to 0.7% from 1.0%.