Introduction to the Swiss National Bank’s Decision
The Swiss National Bank (SNB) has decided to keep its policy rate steady at 0%, as expected, despite a recent unexpected drop in inflation. This decision reflects the bank’s efforts to balance the need to stimulate the economy with the risk of deflation.
Key Points from the SNB’s Decision
The key points from the SNB’s decision include:
- The policy rate remains at 0%
- Inflation forecasts for 2026 and 2027 have been lowered
- Policymakers are more likely to intervene in the foreign exchange market than to ease interest rates further
Inflation Surprised to the Downside
In November, consumer prices fell by 0.2% month over month, pushing annual inflation down to 0%. This decline was driven by lower inflation in the hotel industry, as well as for rent and clothing. The SNB noted that "inflationary pressure in the medium term is virtually unchanged compared to the previous quarter."
Inflation Forecasts
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 forecast is based on the assumption that the SNB policy rate remains at 0% over the entire forecast horizon.
No Negative Interest Rates Expected
The SNB is not expected to cut rates into negative territory. According to Karsten Junius, managing director and chief economist at J. Safra Sarasin, "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." Junius also notes that "we don’t expect policy rate changes in 2026 and forecast the first rate hike in the second half of 2027."
Foreign Exchange Market Interventions
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. Martina Honegger-Romahn, lead portfolio manager fixed income Switzerland at AllianzGI, notes that "the SNB has only intervened significantly in the foreign exchange market once this year, on 2 April, 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."
Swiss Economic Outlook
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
However, unemployment is likely to continue to rise somewhat.
Risks to the Economic Outlook
The main risk to the economic outlook for Switzerland is the development of the global economy. The SNB notes that the decline in GDP in the third quarter of 2025 was due in particular to the pharmaceuticals industry.
SNB Meetings in 2026
The SNB meetings in 2026 are scheduled for:
- March 19
- June 18
- September 24
- December 10
Conclusion
In conclusion, the SNB’s decision to keep its policy rate steady at 0% reflects the bank’s efforts to balance the need to stimulate the economy with the risk of deflation. The bank’s inflation forecasts have been lowered, and policymakers are more likely to intervene in the foreign exchange market than to ease interest rates further. The economic outlook for Switzerland has improved slightly, but the main risk to the outlook is the development of the global economy.
