Key Takeaways
- The Swiss National Bank decision comes amid a busy week for central bank meetings.
- Safe-haven demand for the franc amid the Iran war poses risks to Swiss exporters and economic growth.
- Economists expect the SNB to rely on foreign exchange interventions rather than cutting rates into negative territory to counter franc strength.
The Swiss National Bank is expected to keep its policy rate unchanged at 0% when it meets on March 19, as policymakers weigh the opposing effects of rising energy prices and a strengthening Swiss franc following the escalation of the Iran conflict. Safe-haven flows have boosted the franc while higher oil prices threaten to push inflation upward, leaving currency interventions as the most likely policy response.
Switzerland’s inflation remained low at 0.1% year over year in February for the third consecutive month, while economic growth is moderate and manufacturing indicators remain in contraction territory. The SNB considers inflation between 0% and 2% consistent with price stability.
“Our forecast still assumes an SNB policy rate of 0%. But I would no longer rule out that the SNB may have to consider negative interest rates again, as the franc remains a safe haven,“ says Carsten Brzeski, global head of macro at ING.
The SNB decision comes in a week packed with major central bank meetings: The US Federal Reserve and Bank of Canada will meet on March 18, followed by the European Central Bank, Bank of England, Sweden’s Riksbank, Bank of Japan and the SNB on March 19.
The SNB surprised markets with a rate cut in March 2024, becoming the first major Western central bank to ease policy after a period of worldwide monetary tightening in response to high inflation.
What Does the Iran War Mean for the Swiss Franc and Inflation?
Safe-haven flows pose the biggest challenge for Swiss policymakers. Since the SNB’s December meeting, the EUR/CHF exchange rate has dropped to about 0.90, putting pressure on Swiss exporters.
“The conflict in the Middle East has increased uncertainty and affected two key variables for Swiss monetary policy: the Swiss franc exchange rate, especially against the euro, and energy prices,” economists Maxime Botteron and Alessandro Bee of UBS said.
“Both factors influence the Swiss inflation outlook and could require an adjustment in monetary policy. However, their effects are currently offsetting, leaving the inflation outlook broadly unchanged.”
UBS estimates that a 10% decline in the EUR/CHF exchange rate cuts inflation by about one percentage point, meaning that the recent franc gain could push consumer price growth into deflationary territory.
At the same time, rising energy prices are pushing inflation in the opposite direction.
Oil prices have surged above USD 100 per barrel since the start of fighting in Iran, though the impact on Swiss inflation is limited because petroleum products make up only a small share of the Swiss consumer inflation basket.
J. Safra Sarasin expects slightly higher inflation and GDP growth that is 0.1 percentage points lower this year.
“As a reaction to the rise in energy prices and the impact of the new war in the Middle East on the world economy, we increase our inflation forecast and reduce our GDP forecast for Switzerland,” says Karsten Junius, chief economist at J. Safra Sarasin.
In Junius’s base case, inflation would remain within the SNB’s target range this year, but uncomfortably close to the lower bound.
Will the SNB Intervene in the Foreign Exchange Market?
Given the uncertain economic outlook, analysts say the SNB is likely to avoid major policy moves and instead rely on currency market interventions to limit excessive franc appreciation.
“The SNB’s president has repeatedly emphasized that foreign exchange interventions remain the bank’s preferred first line of defense before it resorts to rate cuts,” says Martina Honegger-Romahn, lead portfolio manager for fixed income at Allianz Global Investors.
“Unless the Swiss franc appreciates significantly or the domestic economic outlook deteriorates sharply, we expect the SNB to rely primarily on foreign exchange interventions in the near term while keeping the policy rate unchanged.”
J. Safra Sarasin’s Junius also says that such intervention is the most likely policy response.
“Given the strong exchange rate and the risk that safe-haven flows lead to a further appreciation of the Swiss franc, we expect the SNB to reinforce its willingness to intervene in the foreign exchange market and that it uses interventions in order to defend a value of around 0.90 EUR/CHF,” he adds.
The war in the Middle East and the oil price shock will dominate this week’s SNB policy meeting.
“Neither the SNB nor we know how long this shock lasts,” Junius says. “Consequently, the SNB is likely to avoid policy decisions that it would have to revise quickly again in case of political developments—which basically excludes changing the policy rate and favours FX-interventions.”
When Are the SNB Meetings in 2026?
- March 19
- June 18
- Sept. 24
- Dec. 10
