Swiss National Bank Holds Interest Rates Steady

Today, the SNB (Swiss National Bank) kept its benchmark interest rate on hold at 0.00%, as many market experts had already priced in a minimal chance of a rate reduction. This is the second straight meeting where the central bank has kept interest rates on hold, against a backdrop of zero inflation, which is at the lower end of the SNB’s target range of 0.00% – 2.00%. The bank signalled that they are open to further rate cuts if threatened with a sustained period of falling prices.

Reasons Behind the Decision

Following the rate decision, the Chairman of the SNB, Martin Schlegel, pointed out that there were bigger considerations than just reducing rates into negative territory, given the financial hits that pension funds, banks’ profits and savers would have to bear. Investors have always seen Switzerland as a haven for savings in times of strife and geopolitical tensions, which has presented the central bank with several problems. 

Under normal circumstances, with inflation at zero and the Swiss franc hitting recent highs against the euro, the case for cutting rates would have been far stronger. But the bank has set a much higher bar for moving into negative rates, making such a move far less likely now.

Inflation Outlook

The SNB has cut its inflation forecast for 2026 to 0.3% and 0.6% for 2027, and experts say that today’s rate cut decision is an indication that the bank is prepared for a fairly long period of low inflation. One market expert noted, “Leaving policy rates at 0.00% now also implies that these low inflation rates will not be sufficient to trigger another cut.” The SNB President Martin Schlegel also pointed out that “Inflation in recent months had been slightly lower than expected, but the outlook is basically unchanged. Our monetary policy is helping to ensure that inflation is likely to rise slowly in the coming quarters.”

Economic Growth and Trade Impact

There was a contraction in the Swiss economy in Q3 due to President Trump placing a tariff of 39% on many of Switzerland’s exports. This has since been replaced with a 15% tariff, which the President of SNB acknowledged was a positive development. 

New data show the Swiss economy is gaining momentum, prompting the central bank to upgrade its growth outlook. GDP growth for 2025 has been revised from 1.0% to just under 1.5%, with the 2026 forecast raised from just under 1.0% to just under 1.5% as well.