The Swiss National Bank maintained the policy rate at 0% for Thursday and remained at that level following six straight declines, as the inflationary demand is virtually steady compared to the previous quarter. Chairman of SNB Martin Schlegel has even warned that a 39 percent US tariff on Swiss exports should pose a substantial challenge to the companies, and the central bank’s officials have stated that they can act, provided it takes a price in the international currency markets.
Monetary policy pause follows aggressive cutting cycle
According to the official press release, the SNB policy rate is maintained by the Swiss National Bank unchanged 0%. The sight deposits of banks kept at the SNB would be paid at the policy rate of the SNB to some level. Discount on sight deposit in excess of this level remains at 0.25 percentage points. The SNB is ready to participate actively in the foreign exchange market when the need arises.
According to Swiss Info, this reduced the key interest rate six times in advance by the SNB. It reduced it by 25 basis points in March, in June, and in September 2024 by 50 basis points last December and by 25 basis points again in March and June. The key interest rate, which was earlier at -0.75 per cent, had a significant increase to 1.75 per cent by June of 2022 in only five moves by the central bank. This was mainly due to the increase in inflation, which has been reduced back to significant levels.
Inflation forecast remains within price stability range
When comparing the last monetary policy assessment, inflation has risen slightly. It increased to 0.2% in August against May, which was -0.1%. This growth was largely due to the rise in inflation of tourism and imported items. The conditional forecast of inflation is also the same, with an average inflation of 0.2% in the year 2025, 0.5% in the year 2026, and 0.7% in the year 2027.
US tariffs cloud Swiss economic outlook significantly
The tariffs applied by the US on Swiss exports of 39 percent are a significant challenge to the companies operating in Switzerland, according to Martin Schlegel, the chair of the SNB, as reported by Swiss Info. These functions, extended since August 7, must slow down business, Schlegel added. In this regard, and by sustaining its key rate at zero, SNB is supporting the economy in itself, sporting an expansionary monetary policy as he said.
The level of economic growth in Switzerland was feeble in the second quarter. Following the steep growth of GDP in the first quarter, it grew by only 0.5%. The pharmaceuticals industry was mostly responsible for the magnified swings within the first six months of 2011. Value added there increased powerfully in the first quarter due to shipping forward the deliveries to the US. An inverse movement was experienced in the second quarter, and on the other hand, it was the services sector to the rescue of the economy.
Central bank maintains expansionary stance amid challenges
SNB still forecasts the growth of the GDP at 1 percent and 1.5 percent during the year 2025 as a whole. The consequence of the tariffs and the high degree of uncertainty in relations is that the SNB anticipates a growth rate of less than 1% in 2026. In this atmosphere, the unemployment rate will probably keep increasing.
Like the measures of the Swiss National Bank keeping the rates unchanged, it was a self-restraint measure against global instability, and also a contributor to the domestic economic troubles. Though this can be seen as evidence that it is working under the expansionary measures of monetary policy, the fact that the central bank is ready to intervene in the foreign exchange market is an indication that the bank is acting on behalf of the Swiss economy to help it survive through the turbulent times.ย