Switzerland slashes interest rates on slowdown fears
Switzerland's central bank slashed key interest rates by a full percentage point on Thursday, its biggest ever cut, and warned of tough times ahead after dismal economic data.
By Agencies |
ZURICH: Switzerland's central bank slashed key interest rates by a full percentage point on Thursday, its biggest ever cut, and warned of tough times ahead after dismal economic data. The Swiss National Bank said it was cutting its three-month LIBOR target range by 100 basis points to 0.5-1.5 percent amid fears of an economic slowdown in 2009.
The move marks the biggest ever rate cut by the SNB and comes after exports, a key driver for the economy, fell 2.8 per cent to 18.2 bn Swiss francs (11.9 bn euros, 14.9 bn dollars) in October. Imports fell 5.5 per cent to 16.4 bn francs, the Federal Customs Office said in statement.
"Extremely poor export data ... may have spurred the move. The chance of further monetary loosening in December is high," said Moody's Economy analyst Melanie Bower in a note. UBS economist Daniel Kalt said the rate cut was "a strong signal that the SNB is worried about the economic climate."
LIBOR -- London Interbank Offered Rate -- is one of the most important benchmarks in the global financial system and is used as a base for many different types of loans over different periods. The SNB said the cut "will provide the Swiss franc money market with a generous and flexible supply of liquidity in order to bring the LIBOR down to the middle of the target range.
"International economic conditions have worsened appreciably, bringing a higher risk of a marked slowdown in economic activity in Switzerland next year," the central bank warned. "By lowering the LIBOR target range by 100 basis points, the SNB is making use of its room for manoeuvre," it added.
Moody's Economy expects Switzerland to go into recession from the third quarter until the end of the year and then post just 0.1 per cent growth in 2009.
The move marks the biggest ever rate cut by the SNB and comes after exports, a key driver for the economy, fell 2.8 per cent to 18.2 bn Swiss francs (11.9 bn euros, 14.9 bn dollars) in October. Imports fell 5.5 per cent to 16.4 bn francs, the Federal Customs Office said in statement.
"Extremely poor export data ... may have spurred the move. The chance of further monetary loosening in December is high," said Moody's Economy analyst Melanie Bower in a note. UBS economist Daniel Kalt said the rate cut was "a strong signal that the SNB is worried about the economic climate."
LIBOR -- London Interbank Offered Rate -- is one of the most important benchmarks in the global financial system and is used as a base for many different types of loans over different periods. The SNB said the cut "will provide the Swiss franc money market with a generous and flexible supply of liquidity in order to bring the LIBOR down to the middle of the target range.
"International economic conditions have worsened appreciably, bringing a higher risk of a marked slowdown in economic activity in Switzerland next year," the central bank warned. "By lowering the LIBOR target range by 100 basis points, the SNB is making use of its room for manoeuvre," it added.
Moody's Economy expects Switzerland to go into recession from the third quarter until the end of the year and then post just 0.1 per cent growth in 2009.
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