In the second half of the year, it became increasingly clear that the US economy would not rebound as quickly as had first been anticipated. In addition, the economic downturn in Europe and, particularly, in Germany, roved to be more pronounced than expected. This also clouded growth prospects for Switzerland. At the same time, current inflation decreased. Therefore, even before the terrorist attacks of 11 September, the ground was prepared for a further reduction in money market rates. When the Federal Reserve and the European Central Bank (ECB) cut their interest rates by half a percentage point on 17 September, the National Bank moved forward its monetary policy assessment scheduled for 20 September and also lowered the target range by 0.5 percentage points to 2.25%–3.25%. Since the other central banks reduced their key interest rates by the same margin, the interest rate differential to other countries did not change. In the subsequent days, the Swiss franc came under strong upward pressure, especially against the euro. On 21 September, the National Bank indicated to the markets that it was extremely concerned about the development on the foreign exchange markets, and on 24 September, it reduced the interest rate target range by another 0.5 percentage points to 1.75%–2.75%. With this cut the National Bank acted in response to the appreciation of the Swiss franc, which threatened to aggravate the monetary conditions in a manner that was undesirable given the flagging economy.
