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News.com.au
an hour ago
- Business
- News.com.au
Swiss central bank cuts interest rates to zero per cent
The Swiss National Bank cut interest rates to zero per cent on Thursday as inflation cools and the franc strengthens, while the economic outlook has deteriorated. The SNB, however, held off a decision to return to its era of negative rates — a policy that helped to curb the Swiss franc's rise but was unpopular among pension funds and other investors. The franc's movement is also under scrutiny in the United States, as the US Treasury Department added Switzerland to its watch list of countries likely to manipulate their currencies earlier this month. The Bank of England kept its key interest rate at 4.25 per cent on Thursday and Norway's central bank announced a surprise cut by a quarter point to 4.25 per cent. The decisions came a day after the US Federal Reserve maintained its benchmark borrowing costs unchanged, citing concerns over high inflation and slowing growth in the world's biggest economy. Gloomy outlook The SNB said its interventions in the foreign exchange market were not aimed at increasing the Swiss economy's competitiveness, but rather were attempts to ensure price stability. The Swiss currency is a safe haven investment that has climbed against the dollar since US President Donald Trump announced tariffs on imports in April. In Thursday's statement, the SNB — which has denied manipulating the franc — said it was still 'willing to be active in the foreign exchange market'. The SNB cited easing inflationary pressure in its decision to cut rates by a quarter point, but it also pointed to a gloomy economic forecast. 'The global economic outlook for the coming quarters has deteriorated due to the increase in trade tensions,' the central bank said, adding that the outlook for Switzerland remained uncertain. Karsten Junius, chief economist at the Swiss private bank J. Safra Sarasin, said it would 'not have been the appropriate time' to surprise the markets, and might even have 'harmed the SNB's standing' to do so. Cooling inflation The SNB said Swiss gross domestic product growth was strong in the first quarter of the year — largely due to exports to the United States being brought forward ahead of Trump's tariff manoeuvres. But stripping that factor out, growth was more moderate, and is likely to slow again and remain subdued for the rest of the year, the SNB said. The SNB expects GDP growth of one per cent to 1.5 per cent for 2025, and for 2026 too. The bank lowered its inflation forecast for 2025 from 0.4 per cent to 0.2 per cent, and for 2026 from 0.8 per cent to 0.5 per cent. Negative rates Between 2015 and 2022, the SNB's monetary policy was based on a negative interest rate of minus 0.75 per cent — which increased the cost of deposits held by banks and financial institutions relative to the amounts they were required to entrust to the central bank. Negative rates make the Swiss franc less attractive to investors as it reduces returns on investments. Overnight, the Swiss franc was down 0.02 per cent against the dollar and up 0.10 per cent against the euro. Adrian Prettejohn, Europe economist at the London-based research group Capital Economics, expected the SNB to move rates to negative 0.25 per cent at its September meeting due to deflation. 'There are also significant downside risks to inflation from trade tensions as well as heightened geopolitical uncertainty, which could push up the value of the franc further,' he said. Following the SNB's announcement, the Swiss franc rose slightly against the dollar and the euro. Switzerland's biggest bank UBS said it expected the SNB to keep its rate at zero per cent for the coming 12 months, and said the central bank's statement suggested it was 'not particularly worried about the current level of the Swiss franc exchange rate'. Kathleen Brooks, research director at the XTB trading platform, said that if the SNB wanted a weaker currency it was 'going to have to intervene directly in the foreign exchange market and sell francs, or it will have to reinstall a peg and defend the level it wants to achieve'.
Daily Mail
2 hours ago
- Business
- Daily Mail
Bank of England boss Andrew Bailey sounds alarm over jobs as it leaves interest rates on hold
Bank of England Governor Andrew Bailey yesterday sounded the alarm over the darkening outlook for jobs as it left interest rates on hold – but opened the door to a cut in August. He said there had been 'signs of softening in the labour market' as a Bank survey found that UK employers are slamming the brakes on pay rises as a result of Rachel Reeves' £25billion raid on employers' National Insurance. Global events are also 'highly unpredictable' as conflict in the Middle East pushes up oil prices and US tariffs also take their toll. The comments are the latest evidence undermining Government claims that it is turning the economy around. Recent figures showed more than 100,000 UK jobs were lost in May with a quarter of a million axed since the Budget. Growth in the first quarter of this year was followed by a downturn in April, when GDP slumped 0.3 per cent. Employment growth is also 'near zero'. The Bank's monetary policy committee left interest rates at 4.25 per cent, citing the need for a 'gradual and careful' approach. But three of the nine members voted for a cut, fuelling hopes of a rate slash in August. Inflation is 3.4 per cent and expected to climb close to 4 per cent by the end of the year. The feedback from the Bank's survey was bleak. Many firms are in 'wait-and-see' mode on tariffs while investment intentions are being held back by factors such as 'fragile demand, trade developments, Government tax and labour policies'.
Times
3 hours ago
- Business
- Times
Bank of England holds steady as divisions emerge over rates
The Bank of England missed the party on Thursday when it announced that interest rates would hold steady at 4.25 per cent. On a day littered with monetary policy announcements across Europe, it was the only major central bank to sit tight. Switzerland's central bank cut rates by a quarter point. Sweden's did the same, as did Norway's. In the UK, the monetary policy committee was not for turning and stuck to the script: markets expected rates to be held and the Bank of England duly delivered. However, that the committee voted 6-3 in favour of leaving rates unchanged did somewhat upset the apple cart. Analysts projected a 7-2 vote split. Dave Ramsden, a deputy governor, broke from the centre ground on the MPC and voted alongside Swati Dhingra and Alan Taylor — external committee members who have repeatedly voted for frequent and larger cuts — for a 0.25 percentage point reduction.
Yahoo
5 hours ago
- Business
- Yahoo
BoE leaves interest rates on hold at 4.25%
The Bank of England has left interest rates on hold at 4.25%. The Bank's Monetary Policy Committee (MPC) chaired by Bank Governor Andrew Bailey voted by 6 to 3 to leave the cost of borrowing unchanged in a blow to heavily indebted businesses and millions of mortgage borrowers. Three members of the MPC voted to cut rates to 4%. Rates were last cut to their current level in May. Today's decision had been widely expected in the City, particularly after it was revealed yesterday that the rate of inflation only fell slightly to 3.4% in May. However most analysts expect the Bank to make its next move in August with a further quarter point cut to 4% to help boost the UK's anaemic economic growth. That would be the fifth reduction since the Bank started easing interest rates from their peak of 5.25% in July last year. A further reduction to 3.75% is widely expected in November Rates were hiked rapidly by the Bank from December 2021 to August 2023 to get a grip of the rampant inflation unleashed by the ending of Covid restrictions and the energy price spike that followed the full scale Russian invasion of Ukraine. It left millions of homeowners who took out fixed two and five mortgage deals at record low interest rates between 2017 and 2021 facing hugely higher costs when they had to remortgage. Around 1.6 million mortgage deals are set to expire this year, according to trade body UK Finance. Suren Thiru, economics director at accounting body ICAEW , said: 'Keeping interest rates unchanged is a big blow to those people wrestling with high mortgage bills and firms struggling with April's host of major bill rises and tax hikes. 'Though this policy loosening cycle is not yet over, this latest decision is further confirmation that the speed of interest rate cuts remains especially cautious, with policymakers wary over elevated inflation and intensifying international instability. 'While just three MPC members voted to cut rates, an August policy loosening remains probable with the meeting minutes indicating continued concerns over the UK's vulnerability to growing economic and geopolitical headwinds. 'With policymakers facing a difficult combination of deepening global turbulence, uncomfortably high inflation and rising oil prices, future interest rate decisions will be more fraught, particularly if the economy weakens further.' Mark Harris, chief executive of mortgage broker SPF Private Clients, said: 'With only a two-way split in voting this time around - three members voted for a quarter-point reduction while six voted for a hold - this is encouraging, suggesting that another reduction could come at the August meeting. 'However, with the Bank opting for a cautious approach, it has missed a real opportunity to be bold by cutting rates again. This would have sent out a strong message, helping boost the housing market and wider economy, particularly now that the stamp duty concession is no longer available. Paul Noble, CEO of online lender Chetwood Bank, said: 'The MPC's lack of action piles on greater uncertainty for mortgages as well, leaving would-be buyers in the lurch. 'This cautious approach could lead to greater paralysis when what markets need is a catalyst. For savers, the risk is time – it's vital to find to best returns, to stay flexible, and to stop letting handwringing on Threadneedle Street dictate their outcome.' Error in retrieving data Sign in to access your portfolio Error in retrieving data
Associated Press
6 hours ago
- Business
- Associated Press
Bank of England says world is ‘highly unpredictable' as it keeps interest rate at 2-year low
LONDON (AP) — The Bank of England warned Thursday about the 'highly unpredictable' geopolitical environment as it kept its main interest rate unchanged at the two-year low of 4.25%. With concerns mounting over the conflict between Israel and Iran, and uncertainty over U.S. President Donald Trump's tariff agenda, rate-setters at the bank were widely expected to keep borrowing costs on hold as they await developments. However, the news that three of the nine policymakers on the Monetary Policy Committee voted to cut rates by a quarter of a percentage point has swelled market expectations that rates will be cut again in August. Minutes to the meeting showed that policymakers were mindful of how the conflict in the Middle East will impact on oil prices, which have risen sharply in recent days to over $75 a barrel. The prevailing view at the bank was that inflation, which currently stands at 3.4%, would remain high over the coming months but start to head back towards next year especially as unemployment has started to rise, a development that can keep a lid on wage demands and hence lower inflation. The uptick in oil prices has the potential to offset that. 'Interest rates remain on a gradual downward path, although we've left them on hold today,' bank governor Andrew Bailey said. 'The world is highly unpredictable.' Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has played it steady, reducing interest rates every three months. That would mean the next reduction is in August. Economists believe that remains the most likely outcome but cautioned that geopolitical events could prompt a reassessment. 'Further escalation of the conflict in the Middle East could push up on U.K. inflation, which could see the Bank move more cautiously,' said Felix Feather, an economist at asset management firm Aberdeen. The cuts have come even though inflation has been above the bank's target rate of 2% for most of that time. Rate-setters can't do much about current inflation so set policy on a longer-term horizon, such as over two years. Uncertainty over the level of tariffs U.S. President Donald Trump will impose around the world is also clouding the outlook for prices around the world. Though the U.K. looks like it will be spared a raft of tariffs, the backdrop for the global economy remains highly uncertain. The tariff issue is at the forefront of concerns at the U.S. Federal Reserve, which on Wednesday kept its key rate unchanged, to the chagrin of Trump, who has been urging the central bank to join others, such as the Bank of England and European Central Bank, and cut borrowing costs.
