In an effort to halt the rising value of the franc, the Swiss National Bank (SNB) has reduced official interest rates by 50 basis points to a target range of 0-0.25 per cent.
It is the first time the bank has lowered the interbank Libor rate since March 2009, and reflects growing pressure on the bank to act to counter the effects of the strong franc on the Swiss economy.
In a news release announcing the move, the bank said it considered the franc to be “massively overvalued at present” and it was aiming for the three-month Libor at “as close to zero as possible”.
“The current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland,” the bank said, adding it would take further measures if necessary.
In addition to lowering interest rates, the bank said it would significantly increase the supply of francs to the money market over the next few days and would embark on a process to expand the bank’s sight deposits (immediately accessible deposits) by SFr50 billion ($64.35 billion).
Following the bank’s announcement on Wednesday, the euro jumped two per cent to SFr1.108, while the dollar rose 1.4 per cent to SFr0.7763.
swissinfo.ch and agencies