Swiss National Bank keeps interest rate at zero as inflation remains contained

Yesterday 22:09

By: Azzat Manal

Swiss National Bank keeps interest rate at zero as inflation remains contained

The Swiss National Bank has decided to leave its key interest rate unchanged at 0%, maintaining an accommodative monetary policy stance as inflation remains relatively low despite renewed pressure from energy prices. The decision, announced on September 24, comes as several major economies continue to face different inflation and interest-rate conditions.

The SNB said its policy rate would remain at zero, while banks’ sight deposits held with the central bank will continue to be remunerated at the policy rate up to a defined threshold. The bank also reiterated its readiness to intervene in foreign-exchange markets if necessary to ensure appropriate monetary conditions.

Swiss inflation has picked up during the summer, rising from 0.6% in May to 0.8% in August. According to the SNB, the increase was mainly driven by higher prices for oil products, which pushed goods inflation back into positive territory for the first time since May 2024. Despite the recent increase, the central bank considers inflation to remain within its range consistent with price stability.

The central bank’s latest conditional forecast points to average annual inflation of 0.7% in 2026, followed by 0.8% in both 2027 and 2028. The forecast assumes that the SNB policy rate remains at 0% throughout the projection period. The bank expects inflation to rise somewhat further in the fourth quarter before easing during 2027 as the impact of higher energy prices gradually fades.

The Swiss approach contrasts with monetary developments in some other major economies. The SNB noted that policy rates have been raised in the euro area and the United States, while energy prices have contributed to renewed inflationary pressure in many countries. Switzerland’s relatively low inflation environment has allowed its central bank to maintain a different policy path.

The strength of the Swiss franc remains another important consideration for policymakers. The SNB said the currency had weakened by around 3% on a trade-weighted basis since its previous assessment, while interest-rate differentials with major monetary areas widened. The central bank remains prepared to use foreign-exchange interventions if a rapid and excessive appreciation of the franc threatens price stability.

At the same time, Switzerland’s economic outlook remains subject to international risks. The SNB expects moderate growth over the coming quarters and currently forecasts GDP growth of between 1.5% and 2% for 2026, followed by growth of around 1.5% in 2027. Manufacturing capacity utilisation remains below average, while unemployment increased somewhat through the beginning of the summer.

Energy markets remain one of the main uncertainties surrounding the outlook. The SNB warned that a further deterioration in the Middle East could push energy prices higher, intensify inflationary pressure and weigh on global economic activity. Trade-policy developments and exchange-rate movements are also considered important sources of uncertainty for Switzerland.

The decision therefore leaves Swiss borrowing costs at their current level while the central bank continues to monitor inflation, energy prices, the franc and international economic developments. With its latest inflation forecast still within the price-stability range, the SNB has signalled that it sees no immediate need to alter its current monetary-policy setting.