Switzerland Was Correct to Lower Interest Rates, IMF Says

(Bloomberg) — Switzerland’s surprise reduction in borrowing costs last week was appropriate as consumer-price growth is under control, according to the International Monetary Fund. 

“With inflation comfortably in the 0% to 2% price stability range, the Swiss National Bank was right to lower its policy rate in March,” the Washington-based lender said Thursday in an annual assessment of the country. 

“Medium-term inflation expectations remain well anchored at around 1.2%,” it said. “Monetary policy should be forward-looking and remain responsive to incoming data on economic activity and the international environment.”

The IMF also said:

• “Given the risks associated with its large balance sheet, the SNB should continue to build equity and utilize any scope for reducing its balance sheet”
• “Fiscal policy is well anchored with the debt brake, while rising spending pressure requires measures to eliminate structural deficits, including to ensure financial security for the pension system”
• “Lessons for financial stability and the regulatory and supervisory framework should be learned from the takeover of Credit Suisse by UBS”
• “The measures taken by the authorities as part of the takeover of Credit Suisse by UBS have strengthened the stability of the financial sector, but further steps are needed. The lessons from this crisis situation point to the need for increased regulation, particularly in view of the size and complexity of the Swiss big bank’s global activities”

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