Swiss National Bank Holds Rate at 0% as Inflation Stays Low

ZURICH: The Swiss National Bank kept its key interest rate at 0% on Thursday, Sept. 24, holding still while the central banks of Switzerland's biggest trading partners raise borrowing costs, CNBC reported on Sept. 24.

The case for waiting is in the inflation numbers. Swiss consumer prices rose 0.8% in the year to August, up slightly because of gasoline, diesel and heating oil costs. That is inside the SNB's objective of keeping inflation between 0% and 2%. The Federal Reserve, the Bank of England and the European Central Bank all target 2%, and their economies are running hotter.

Zurich Stands Apart From Its Neighbors

The European Central Bank, the Federal Reserve and the Bank of Japan have all started raising rates this year. The Fed made its first increase since 2023 on Sept. 16. The central banks of Canada and the U.K. are expected to follow later in the year. The Bank of England held at 3.75% on Sept. 17, but three of its nine policymakers already voted for a hike.

SNB Chairman Martin Schlegel told CNBC's Carolin Roth that the board decided on the inflation picture alone. "We make monetary policy for Switzerland," he said, while adding that a small open economy cannot ignore what happens abroad. He called 0% appropriate "at the moment."

The Bank's Own Forecast

The SNB expects inflation to "continue to rise somewhat in the fourth quarter, before declining again over the course of 2027," as elevated energy prices fade. Its conditional forecast puts average inflation at 0.7% in 2026, 0.8% in 2027 and 0.8% in 2028. Every one of those numbers sits well below 2%.

Schlegel still flagged risk. "Uncertainty in general is still very high," he said, and pointed to the franc. In early March, when the war in Iran broke out and safe-haven money poured in, the SNB said it was more willing to intervene to stop the franc from rising sharply. The franc has since weakened. "We are in a different situation, but we still have the willingness to intervene in the FX market if necessary," he said.

Why Swiss Prices Stay Quiet

A strong franc makes imports cheaper, and imports carry a lot of weight in the Swiss economy. The currency gained more than 12% against the dollar in 2025, although the dollar has clawed back about 4% this year.

The makeup of the price basket helps too. Gedeon Tumong of HIM Business School told CNBC that energy is about 3.5% of the Swiss inflation basket, against about 7% in the euro zone, and that hydropower and nuclear power cushion the country from regional price spikes. He also cited Switzerland's debt brake, which requires balanced budgets and keeps bond yields down.

INSEAD economist Antonio Fatás offered a useful check. Adjusted for inflation, Switzerland is not unusual. A 0% rate with 0.8% inflation gives a real rate of about minus 0.8%. The euro area, with a 2.5% policy rate and inflation near 3.2%, lands at about minus 0.7%.

Markets Price a Hike by Early 2027

Traders see roughly even odds of a hike in December and put the chance of the SNB starting to raise rates by early 2027 at more than 90%. LSEG data show bets on the policy rate reaching at least 0.75% by next September.

UBS had pencilled in a first hike for June 2027. In a note this month, its economists said the franc's fall of more than 2% against the euro and more than 1% against the dollar since the SNB's June meeting could bring that forward. "The SNB has a history of surprising markets," they wrote.

For companies that borrow in francs, the message is that zero will not last indefinitely. The next test is the December meeting, and the franc's path between now and then will do much to decide it.