Key Takeaways
- Swiss National Bank holds policy rate steady at 0% as expected, despite a recent unexpected drop in inflation.
- SNB lowers inflation forecasts for 2026 and 2027
- Policymakers more likely to intervene in the foreign exchange market than to ease interest rates further
Switzerland’s central bank, the first in Europe to start cutting rates in early 2024, kept interest rates at zero on Thursday as the country battles deflation. Despite a recent unexpected fall in inflation, the market expectation was that the Swiss National Bank would not return to negative rates.
Inflation Surprised to the Downside
In November, consumer prices fell by 0.2% month over month, pushing annual inflation down to 0%. Lower inflation in the hotel industry, as well as for rent and clothing, contributed to this decline. “Inflationary pressure in the medium term is virtually unchanged compared to the previous quarter,” the SNB said.
The SNB’s forecast is within the range of price stability over the entire forecast horizon through mid-2028. The bank’s economists forecast inflation of:
- 0.2% for 2025 (flat from the September forecast)
- 0.3% for 2026 (down from 0.5% in September)
- 0.6% for 2027 (down from 0.7% in September)
The bank forecasts inflation in the first three quarters of 2028 to come in between 0.7% and 0.8%. The forecast is based on the assumption that the SNB policy rate remains at 0% over the entire forecast horizon.
“Most importantly the SNB left the endpoint of its inflation profile at 0.8% which indicates that it regards the current policy level as sufficiently low to stimulate the economy and to deliver on its inflation mandate,” says Karsten Junius, managing director and chief economist at J. Safra Sarasin.
SNB not Expected to Cut Rates Into Negative Territory
“The SNB lowered its inflation forecast for 2026 to just 0.3% and thereby signals that it is prepared for a prolonged period of low inflation in the coming quarters. Leaving policy rates at 0% now also implies that these low inflation rates will not be sufficient to trigger another rate cut,” Junius says. “We don’t expect policy rate changes in 2026 and forecast the first rate hike in the second half of 2027.”
The forecast is based on the assumption of a gradual appreciation of the Swiss Franc towards 0.91 versus the euro by the end of 2026.
We don’t expect policy rate changes in 2026 and forecast the first rate hike in second half of 2027.
Karsten Junius, Managing Director and chief economist at J. Safra Sarasin
Martina Honegger-Romahn, lead portfolio manager fixed income Switzerland at AllianzGI, says: “The SNB is likely to resort to foreign exchange market interventions rather than interest rate cuts to combat low inflation, which is mainly due to low import prices.”
The weakness in inflation is mainly due to imported inflation, which can be influenced by foreign exchange market interventions, she adds. “The SNB has only intervened significantly in the foreign exchange market once this year, on 2 April (known as ‘Liberation Day’), following the announcement of the US global tariff program. The central bank therefore has sufficient capacity to intervene in the foreign exchange market again if necessary.”
“One factor that is often overlooked in this context is the historically high yield differential of 2.6 percentage points between 10-year German government bonds and Swiss government bonds, which creates a natural tailwind for a weaker EUR/CHF exchange rate.”
Swiss Economic Outlook Improving
The economic outlook for Switzerland has improved slightly due to the lower US tariffs and somewhat better development globally, according to the SNB. SNB staff expect GDP growth of
- just under 1.5% for 2025
- around 1% for 2026
“In this environment, unemployment is likely to continue to rise somewhat,” the SNB statement said.
Swiss GDP contracted in the third quarter of 2025. The decline was due in particular to the pharmaceuticals industry. “Value added there had risen strongly in the first quarter because deliveries to the US had been brought forward in anticipation of possible tariffs. There was a countermovement in the second quarter, which continued in the third quarter. Value added rose slightly in the other manufacturing industries and in services. Owing to this subdued economic development overall, unemployment has risen further in recent months.”
According to the SNB, the main risk to the economic outlook for Switzerland is the development of the global economy.
When Are the SNB Meetings in 2026?
- March 19
- June 18
- Sept. 24
- Dec. 10
