The Swiss Central Bank has lowered the interest rate by 25 basis points, entering the zero interest rate era.

Gate News bot reported that according to CNBC, the Swiss Central Bank further cut the Interest Rate by 25 basis points to 0% on Thursday, intensifying concerns about a possible return to negative interest rates.

Before the Central Bank makes a decision, the market generally expects a rate cut. Previously, traders estimated the likelihood of a 25 basis point rate cut to be about 81%, while the possibility of a larger cut of 50 basis points was approximately 19%.

The Swiss Central Bank stated in a statement: “Compared to the previous quarter, inflationary pressures have decreased. Through today’s monetary policy easing, the Swiss Central Bank is responding to lower inflationary pressures.”

The statement added: “The Swiss Central Bank will continue to closely monitor the situation and adjust monetary policy as necessary to ensure that inflation remains within a range consistent with price stability in the medium term.”

While other countries are still dealing with inflation, Switzerland is facing deflation, with the consumer price index falling by 0.1% year-on-year in May.

Low inflation levels are not uncommon for Switzerland - the country has experienced several instances of deflation in the 2010s and 2020s. The strength of the Swiss currency, the Swiss Franc, is the main driving factor behind this trend.

Charlotte de Montpellier, a senior economist at ING responsible for France and Switzerland, stated: “As a safe-haven currency, the Swiss franc tends to appreciate when global markets are under pressure.”

Montpellier stated in an interview before the Central Bank announced this decision: “This systematically depresses the prices of imported goods. Switzerland is a small open economy, and imports account for a large proportion of the Consumer Price Index (CPI) inflation.”

Against the backdrop of high uncertainty in the global economy, the Swiss franc has continued to strengthen in recent months, and it is generally expected to continue to do so, indicating that the Swiss Central Bank still faces challenges.