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Swiss National Bank Keeps Key Rate at 0%, Edges Up Inflation Forecasts Amid Middle East War

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Swiss National Bank Keeps Key Rate at 0%, Edges Up Inflation Forecasts Amid Middle East War

Switzerland's central bank on Thursday left its key rate unchanged at 0%, as widely expected, while slightly raising its inflation forecasts amid the ongoing Middle East war and other global economic uncertainties.

The Swiss National Bank (SNBN.SW) said the 0% policy rate will be applied to banks' sight deposits up to a certain threshold, with deposits exceeding this threshold remaining subject to an unchanged discount of 0.25 percentage points. The central bank also said it is "willing to be active" in the foreign exchange market as needed, dropping its prior language of an "increased willingness to intervene."

"Since our last monetary policy assessment in June, inflation has risen further. This rise above all reflects the higher energy prices. Despite this development, at 0.8%, inflation in Switzerland is relatively low by international standards," according to Governing Board Chairman Martin Schlegel. "In addition, our new conditional inflation forecast indicates that medium-term inflationary pressure has only increased slightly compared with June. Assuming a constant SNB policy rate of 0%, the inflation forecast remains within the range consistent with price stability, which we equate with an inflation rate of between 0% and 2%, over the entire forecast horizon."

The SNB edged up its average annual inflation forecast for 2026 to 0.7%, against the previous 0.6% projection in its June 2026 monetary policy assessment. For 2027 and 2028, the new conditional inflation projections stand at 0.8% for both years, compared with the earlier estimates of 0.6% and 0.7%, respectively.

In terms of economic growth, Switzerland's gross domestic product is projected to be between 1.5% and 2% for 2026, following "exceptionally strong" growth in the second quarter of the year on the back of an "unusually robust performance" in the chemicals and pharmaceuticals industry.

For 2027, GDP growth is still expected to come in at 1.5%, although the SNB warned that uncertainties related to the situation in the Middle East and the trade policy environment continue to be the main risks to the country's economic outlook.

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