GENEVA, Switzerland: The Swiss National Bank (SNB) announced that it had reduced its main policy rate by a quarter of a percentage point, lowering it to 1.25 percent from 1.5 percent, effective June 21.

This decision comes in response to a decline in "underlying inflationary pressure," despite rising costs in areas such as rents, tourism services, and oil products.

This marks the second such cut by the SNB this year, following a similar reduction in March that surprised many market analysts. The central bank highlighted that inflation in Switzerland is currently driven primarily by higher prices for domestic services.

Over recent months, major central banks worldwide have been tightening monetary policy to combat inflation by making borrowing more expensive, thereby cooling economic activity and reducing upward pressure on prices. However, the SNB noted a shift in this trend.

"Global economic growth was solid in the first quarter of 2024," the SNB stated. "Inflation largely moved sideways over the past months and remained above central banks' targets in many countries. However, the underlying inflationary pressure continued to decrease slightly."

The SNB acknowledged that some other central banks have also recently eased their monetary policies after a prolonged period of tightening over the last two years. Despite these adjustments, the Swiss bank warned that inflation might persist in some countries and that "geopolitical tensions" could negatively impact global economic activity.