SNB may have room to cut rates

The Swiss central bank is winning a tug-of-war with markets, giving it room to cut interest rates again as the economic growth outlook worsens.

The Swiss National Bank (SNB) has pushed the three-month rate for borrowing francs in London, or Libor, closer to its target after flooding the financial system with cash. The Libor rate has dropped almost half a percentage point since hitting a seven-year high on Oct 10 and is now just 14 basis points above the SNB's 2.5 percent goal.

"The fact that Libor is coming down shows that they're gradually regaining control," said Jan Amrit Poser, chief economist at Bank Sarasin in Zurich. "The SNB is under considerable pressure to cut rates" and may move as soon as today.