Finimize - 🚨 Switzerland cut rates

What’s going on here?

The Swiss National Bank (SNB) bucked expectations by cutting interest rates, claiming victory over inflation and its European neighbors.

What does this mean?

Most economists expected the SNB to hold interest rates steady at 1.75% when it met on Thursday, with only a few putting their cards on a cut. After all, higher rates don't seem to be weighing on Switzerland’s economy and job market too much. The number crunchers’ group chats must have been abuzz, then, when the central bank lowered the rate by 0.25% to 1.5%. That officially made Switzerland the first advanced economy to cut interest rates since inflation picked up after the pandemic and war in Ukraine. The decision came after February’s inflation reading landed at 1.2%, the same as Switzerland’s 2021 level and easily below its 2% target – proving that it is possible to put the inflation genie back in the bottle.

Why should I care?

Zooming in: To be franc…

Traders now expect the SNB to cut rates twice more before the year is out. Remember, though, that lower interest rates tend to bring currencies down with them, which is why the Swiss franc fell by around 1% against the US dollar after the news. The central bank needs to keep an eye on that: a lower Swiss franc makes it more expensive to import goods – and that could coax inflation back into town.

Zooming out: Central banks are turning green.

The SNB brought its inflation forecasts down a notch or two, estimating 1.4% for this full year, 1.2% for next, and 1.1% for 2026. That’ll be the envy of central banks in the US, UK, and Europe as a whole. Stubborn inflation is forcing them to keep their interest rates high, potentially sacrificing their economies by forcing folk to hold off from spending and companies from investing.

What’s going on here?

Research published this week suggested that declining birth rates in many countries could reshape the global economy.

What does this mean?

The global population will tick up from today’s 8 billion to 9.7 billion by 2050, according to the United Nations. Yet at the same time, medical journal The Lancet predicts that three-quarters of all countries will struggle to keep their populations stable from 2050. That’s because birth rate projections aren’t equal across the board. Women are statistically expected to have 2.1 children each to build the next generation – a daunting expectation that many are now ignoring, especially in wealthier countries. That means most of the future population increase will come from lower-income areas, specifically in Asia and sub-Saharan Africa, where climate change and limited resources are already straining communities.

Why should I care?

Zooming out: Money makes the difference.

Countries with shrinking populations will end up with shrinking workforces, too, which can be a serious drag on their economies. The opposite is true when a country’s population increases: a bigger and younger workforce means more productivity and economic growth, as well as a wider pool of consumers for companies to sell to. That only works with the right infrastructure, though, so developing countries – where populations are expected to increase – need to attract enough money to fund education, businesses, and healthcare services to make sure their economies don’t bust, but boom.

The bigger picture: People schmeople.

Japan’s workforce is already weakening, and with the country’s birth rate falling for the eighth year in a row, that trend looks locked in. In fact, Japan is projected to have 11 million fewer workers by 2040, with nearly a third of its population landing in the over-65 category. Don’t forget, though, that we’re hurtling toward a future run by robots: Japan’s already rolling out AI avatars and services to plug the gap – so maybe AI won’t steal jobs, but scavenge them.