ZURICH (March 21): The Swiss National Bank cut its main interest rate by 25 basis points to 1.50% on Thursday, a surprise move which made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation.

The central bank, in the first rate decision since long-serving chairman Thomas Jordan said he would step down in September, also cut its interest rate on sight deposits to 1.50%.

This is SNB’s first rate cut in nine years, and the move wrong-footed markets, sending the Swiss franc to an eight-month low against the euro and Swiss government bond yields tumbling, while boosting Zurich-listed shares.

A majority of analysts polled by Reuters had expected the usually conservative SNB to keep rates on hold at 1.75% and wait at least another three months before moving.

“SNB is the first central bank to declare victory over inflation,” said Karsten Junius, chief economist at J Safra Sarasin, who had expected a rate cut.

The step follows a drop in Swiss inflation to 1.2% in February, the ninth month in succession that price rises have been within the SNB’s 0-2% target range.

“The easing of monetary policy has been made possible because the fight against inflation over the past two and a half years has been effective,” Jordan told reporters, noting how Swiss inflation has held below 2% for several months.

“According to our new forecast, inflation is also likely to remain in this range over the next few years.”

The SNB said it was taking into account the reduced inflationary pressure as well as the appreciation of the Swiss franc in real terms over the past year. The cut would support economic activity, it added.

Before the decision, Swiss industry had urged the central bank to broaden its focus from fighting inflation to help them deal with the strong franc, which was eating into profits.