(Alliance News) - The Swiss National Bank cut its benchmark rate to zero on Thursday, saying it is "countering" tamer inflation.

The SNB policy rate was reduced by 25 basis points to 0%. The move was expected by the market. The SNB had cut by 25 basis points in March, a move which followed a 50bp cut in December. That had followed three successive quarter-point cuts.

"Inflationary pressure has decreased compared to the previous quarter. With today's easing of monetary policy, the SNB is countering the lower inflationary pressure. The SNB will continue to monitor the situation closely and adjust its monetary policy if necessary, to ensure that inflation remains within the range consistent with price stability over the medium term," the central bank said.

The SNB defines price stability as an annual consumer price index rise of "less than 2%".

According to the Federal Statistics Office earlier in June, Swiss consumer prices fell 0.1% on-year in May. They had been flat in April.

Save for a few spikes in some months, the pace of consumer price inflation in Switzerland has been on a downward trend since a recent peak of 3.5% in August 2022, culminating with the deflation seen in May.

The SNB said: "Swiss GDP growth was strong in the first quarter of 2025. However, this development was largely due to the fact that, as in other countries, exports to the US were brought forward. When adjusted for these effects, growth momentum was more moderate."

Switzerland's trade surplus narrowed significantly in May as its trade surplus with the US shrank, data published by the Federal Office for Customs & Border Security showed on Thursday. The country's trade surplus narrowed by 64% to CHF1.98 billion, around USD2.41 billion, in May from CHF5.43 billion in April.

The SNB expects Swiss economic growth to slow after a 0.5% on-quarter expansion in the first three months of the year. Growth had picked up from 0.3% in the fourth-quarter.

"Following the strong first quarter, growth is likely to slow again and remain rather subdued over the remainder of the year. The SNB expects GDP growth of 1% to 1.5% for 2025 as a whole. The SNB currently also anticipates GDP growth of 1% to 1.5% for 2026. Unemployment is likely to continue to rise slightly," the SNB added.

It trimmed its inflation forecast. It sees consumer prices being flat on-year in the second quarter, rising 0.1% in the third and 0.3% in the fourth. Its March forecast was for a second quarter inflation rate of 0.3%, 0.4% for the third and 0.6% for the fourth.

The SNB had kicked off a hiking cycle back in June 2022, with a half-point hike to take rates to -0.25%. It then enacted a 75bp lift to take rates above zero to 0.50% in September 2022.

By Eric Cunha, Alliance News news editor

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