Swiss National Bank holds rates at 0% despite global tightening, citing low inflation and strong franc

Key points

• SNB maintained its policy rate at 0%, with sight deposits remunerated at this rate up to a certain threshold, while the discount for deposits above that threshold remained at 0.25 percentage points.
• Switzerland's annual inflation rate reached 0.8% in August, driven primarily by rising gasoline, diesel, and heating oil costs, but remains far below the 2% targets of the US, UK, and euro zone.
• SNB Chairman Martin Schlegel emphasized that the bank makes monetary policy for Switzerland, though he acknowledged that as a small open economy, external factors and global trends significantly influence decisions.
• The SNB stated it remains willing to intervene in foreign exchange markets to ensure appropriate monetary conditions, noting that the Swiss franc has weakened over recent months after a strong appreciation in 2025.
• Inflation is forecast to average 0.7% in 2026, 0.8% in 2027, and 0.8% in 2028, with energy inflation expected to decline in coming quarters before rising slightly again.
• Traders are betting on the SNB's key rate rising to at least 0.75% by September 2027, with UBS economists suggesting a potential earlier hike due to franc depreciation and elevated oil prices.

Background

This decision follows a period of global monetary tightening, where the Federal Reserve, European Central Bank, and Bank of Japan have all raised rates to combat rising inflation, as noted in earlier coverage from September 2026. The Bank of England also recently held rates steady amid inflation pressure. Switzerland's unique economic structure, including its strict fiscal debt brake and reliance on alternative energy sources like hydropower and nuclear power, has helped insulate it from the inflationary surge seen in neighboring nations.

How outlets are covering it

CNBC highlights the divergence of the SNB from major trading partners and emphasizes the role of the Swiss franc's safe-haven status in keeping inflation low. It notes that while the SNB is currently holding rates, market expectations point to a future hiking cycle. Forex Factory provides the official SNB statement, confirming the rate hold and the bank's willingness to intervene in FX markets, while also noting that inflation has risen further since June primarily due to higher energy prices. Continuum Economics focuses on the technical aspects of the USD/CHF exchange rate, noting a fresh year high in CHF-driven trade, which aligns with the SNB's concerns about currency appreciation and its readiness to intervene. UBS economists, cited by CNBC, suggest that the falling value of the franc and elevated oil prices could lead to an earlier-than-expected rate hike, contrasting with the SNB's current stance of maintaining 0% rates.

Why it matters

The SNB's decision to hold rates at 0% while major global central banks hike rates underscores the unique position of the Swiss economy, which benefits from a strong currency and low inflation. This divergence could impact global capital flows and currency markets, as investors may seek the Swiss franc for its stability and low borrowing costs. The SNB's willingness to intervene in FX markets also signals its commitment to preventing excessive currency appreciation, which could affect trade balances and economic growth. As global inflation remains a concern, the SNB's stance may influence expectations for future monetary policy in other economies, particularly those with similar structural advantages.

What to watch

The SNB is expected to monitor inflation and foreign exchange markets closely, with potential interventions to prevent excessive franc appreciation. Market traders are watching for signs of a rate hike, with a near 50-50 chance in December and over 90% odds by early 2027. The bank's next decision will likely depend on the trajectory of energy prices, the strength of the Swiss franc, and global economic conditions. UBS economists suggest that a further depreciation of the franc and elevated oil prices could accelerate the timeline for a rate hike, while the SNB's forecasts indicate that inflation will rise slightly in the fourth quarter before declining in 2027.