Swiss National Bank cuts interest rate to 1%

20 November 2008

ZURICH – The Swiss National Bank has cut its key interest rate in half to 1 percent, its second reduction this month.

The central bank’s decision Thursday comes amid expectations other central banks, including the U.S. Federal Reserve will also cut rates further to support growth.

Before this month, the Swiss bank had reduced its rates only once in the last 5½ years.

Falling prices give central banks room to lower interest rates. The cuts can spark economic activity, but currencies often suffer as investors move their money in search of better returns.

Inflation in Switzerland has dropped markedly as energy and commodity prices have eased. It is expected to fall below 2 percent by the end of the year – a key threshold that some banks look to as conducive to growth.

[AP / Expatica]