The Swiss National Bank kept its key interest rate at 0% on Thursday, bucking the tightening trend sweeping through major global central banks.
The decision marked a clear divergence from the European Central Bank, the U.S. Federal Reserve, and the Bank of Japan, all of which have begun raising rates.
Switzerland’s annual inflation rate came in at 0.8% in August, pushed higher by rising gasoline, diesel, and heating oil costs, but remaining well within the SNB’s 0%-to-2% target range.
Traders are currently pricing roughly even odds of a December rate hike, with more than a 90% chance the SNB begins raising rates by early 2027.
Data from LSEG shows traders are betting the SNB’s key rate will rise to at least 0.75% by next September, signaling growing conviction that the era of zero rates is nearing its end.
SNB Chairman Martin Schlegel told CNBC’s Carolin Roth that policymakers kept rates unchanged based on the current inflation picture, while cautioning that “uncertainty in general is still very high.”
The SNB’s own forecasts project average annual inflation reaching 0.7% in 2026, 0.8% in 2027, and 0.8% in 2028, with energy inflation expected to ease over coming quarters.
Schlegel noted the recent weakening of the Swiss franc as a factor policymakers are watching, saying the SNB retains its willingness to intervene in foreign exchange markets if necessary.
“Of course, Switzerland is a small open economy, so what happens abroad really matters quite a lot for Switzerland,” Schlegel told CNBC, adding that global developments are always folded into the bank’s decisions.
Swiss lender UBS had previously anticipated the SNB’s first hike would arrive in June 2027, but economists at the bank recently flagged the falling franc as a reason the timeline could shift forward.
“Swiss franc depreciation of more than 2% against the euro and more than 1% against the US dollar since the last SNB meeting in June could increase concerns that inflation will accelerate more than previously anticipated,” UBS economists wrote in a note.
“Although we believe inflation is quite unlikely to exceed 2% over the next 12-18 months, the SNB has a history of surprising markets,” they added.
The franc rose more than 12% against the dollar during widespread market volatility in 2025, though the greenback has since clawed back around 4% of those losses this year.
Gedeon Tumong, head of finance specialization at Switzerland’s HIM Business School, told CNBC the Swiss economy benefits from what some economists describe as a “safe haven dividend.”
“Unlike the U.S., the U.K. and the euro zone, Switzerland imports credibility as much as it imports goods,” Tumong said, explaining how foreign capital inflows reinforce the franc’s strength and help contain imported inflation.
Tumong noted that energy accounts for only about 3.5% of the Swiss inflation basket, compared to roughly 7% in the euro zone, with hydropower and nuclear energy providing further insulation from commodity price swings.
Antonio Fatás, a professor of economics at INSEAD business school in France and an external consultant for the IMF, told CNBC that Switzerland’s long history of low inflation keeps inflation expectations firmly anchored.
Fatás pointed out that on a real interest rate basis, Switzerland is not as much of an outlier as its headline 0% rate might suggest compared to peers in Europe and the United States.
“So overall this is a story of low inflation that persists through the years and anchors the expectations of all economic players,” Fatás said.
