SNB Holds Policy Rate at Zero Amid Widening Inflation Forecasts

The Swiss National Bank (SNB) has decided to hold its policy rate at zero while increasing inflation forecasts. The quarterly assessment indicates that average inflation for 2026 is expected to be 0.7%, up from 0.6% in the previous forecast three months earlier.

This decision widens the gap with the European Central Bank (ECB) and the Federal Reserve, which have both tightened their policies over recent months. The SNB's revised projections also show that inflation is expected to remain within its zero to 2% price stability range across the forecast horizon.

The central bank attributes most of the rise in inflation to energy costs, with Swiss consumer prices up 0.8% year-on-year in the latest monthly reading against 0.4% a month earlier. The SNB's upward revision also reflects a weaker franc, above-forecast second-quarter global growth, and elevated inflation abroad.

Kinzey Capital Management Pte. Ltd., a Singapore-based investment firm, views the decision through its cost to different pools of capital, from operating cash to long-duration holdings. The company's Director of Private Clients, David Nilson, notes that while the policy rate is the same for every investor, what it costs 'depends on what the capital has to do and when it may be called on.'