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SNB surprises with early monetary policy easing, while other central banks continue to wait

The Swiss National Bank (SNB) was one of the first central banks to ease monetary policy, taking financial markets by surprise. The move was justified by the significant fall in inflation and the appreciation of the Swiss franc. For their part, the British and Norwegian central banks left interest rates unchanged. However, the Bank of England (BoE) indicated that it would soon start to ease monetary policy. The positive trend on the US stock markets continued, with stock indices in Tokyo also reaching new highs.

Alessandro Fezzi, LGT
Reading time
5 minutes
Swiss National Bank
© Shutterstock

The SNB sent a signal by cutting interest rates earlier than expected. The SNB lowered its key interest rate by 25 basis points to 1.5%. Meanwhile, both the US Federal Reserve (Fed) and the European Central Bank (ECB) are still on hold. The easing of monetary policy was prompted by a sharp fall in Swiss inflation to 1.2% in February. The SNB also adjusted its inflation forecast and now expects an average inflation rate of 1.4% for the current year and even lower inflation rates of 1.2% and 1.1% for 2025 and 2026. The appreciation of the Swiss franc also played a key role. However, Thomas Jordan, who will leave the central bank in autumn, also stressed that the forecast is subject to considerable uncertainty and depends on the development of the global economy.

As expected, the BoE left its official interest rate unchanged at 5.25%, but signalled an imminent easing of monetary policy thanks to falling inflation. BoE Governor Andrew Bailey stressed that there had been further encouraging signs of falling inflation recently. In February, the UK's inflation rate was 3.4%, its lowest level since September 2021.

Norway's central bank kept its key interest rate on hold at 4.5%. Given the relatively high inflation rate of 4.5% in February, it is unlikely that interest rates will be eased any time soon.

On the New York Stock Exchange, stock indexes continued their record run, driven by the prospect of Fed rate cuts. The Dow Jones Industrial closed up almost 0.7% at 39,781.37 and the S&P 500 closed up 0.3% at 5,241.53. The Nasdaq index was up around 0.4%. Among individual stocks, the semiconductor company Micron was the standout performer, rising more than 14% to a record high on the back of a positive quarterly outlook and strong demand for products related to artificial intelligence (AI). At the other end of the spectrum was Apple. The stock lost 4% after the US government filed a lawsuit accusing it of unfair competition in hardware and software features. In the bond market, the benchmark yield on ten-year Treasuries edged higher to 4.35%.

In Tokyo, the Nikkei 225 hit a new record high at the end of the week and closed 0.2% higher. Earlier it was reported that inflation in Japan accelerated in February. Japan's headline inflation rate was 2.8% in February, up from 2.2% in the previous month. Core inflation was 2.8%, up from 2% in the previous month. Earlier this week, the Bank of Japan abandoned its year-long negative interest rate policy and began a turnaround on interest rates. The Topix also set a new record with a gain of 0.6%. In contrast, Hong Kong's Hang Seng Index fell 2%, weighed down by electric vehicle stocks, after rising just under 2% on Thursday. The Hang Seng Tech Index lost 4%, while the CSI 300 in mainland China fell 1%. South Korea's Kospi fell 0.2% and in Australia the S&P/ASX 200 was down 0.1%.

Corporate news in focus: Galderma (Switzerland) IPO.

Economic data in focus: UK Retail Sales, Germany Ifo Business Climate Index, Fed Chair Powell speaks (14:00 CET). 

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Lten steht Ihnen ein Berater der Bank gerne zur Verfügung.

Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi
Quelle: LGT Bank (Schweiz) AG

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