Swiss cut key interest rate by a quarter percentage point, putting its target now at 0%

GENEVA (AP) — Switzerland’s central bank said Thursday it has reduced its target interest rate by a quarter of a percentage point, adding that inflationary pressures have eased.

The Swiss National Bank says its policy rate would drop to zero from 0.25%, after noting that nearly flat inflation nosed into negative territory in May compared to February.

Many Western economic powers have been grappling with monetary policy at a time when prices have fallen in many places but political instability — particularly when it comes to conflicts in the oil-rich Middle East — and U.S. tariffs have unsettled financial markets in recent months.

The SNB attributed the drop in inflation in Switzerland primarily to declining prices in the tourism and oil sectors. It’s now projecting annual inflation at 0.2% this year, before edging up to a half-point next year and 0.7% in 2027, based on the scenario that its target interest rate will remain at zero over that span.

“In its baseline scenario, the SNB anticipates that growth in the global economy will weaken over the coming quarters,” it said in a statement. “Inflation in the U.S. is likely to rise over the coming quarters. In Europe, by contrast, a further decrease in inflationary pressure is to be expected.”

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Switzerland enjoyed “strong” economic growth in the first quarter, the bank said, largely because exports to the United States were brought forward as companies sought to anticipate future U.S. tariffs that could raise price of foreign goods for American consumers.

The U.S. Federal Reserve kept its key rate unchanged Wednesday as it waits for additional information on how tariffs and other potential disruptions will affect the economy this year. U.S. President Donald Trump has pressed the Fed to lower interest rates, hoping it will boost the U.S. economy.