Powell Throws in the Towel
The big surprise in March was a rate cut of 25bps to 1.5% from the Swiss National Bank. The SNB’s decision, its first rate cut in nine years, made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation. The SNB stole the limelight from the Bank of Japan, which ended eight years of negative interest rates with its first interest rate hike in 17 years. The BOJ cut its short-term policy rate from -0.1% to between zero and 0.1% and it also ended the yield curve control on the Japan 10-year government bond. The BoJ started its negative interest rate policy in 2016 to prevent a stronger yen from damaging the export-oriented economy, and to fight deflation, though after significant wage increases at large companies, the bank decided to end the policy. Interestingly, the last two central banks with negative interest rate policies decided to end them within a week of each other, just as the other major central banks embark on new rate cutting cycles.
