SNB Keeps Key Rate at 0% Amid Low Inflation and Strong Franc
The Swiss National Bank has decided to keep its key interest rate at 0%, differing from its main trading partners like the European Central Bank and the U.S. Federal Reserve, which have already raised rates to curb inflation.
The bank's decision is driven by low inflation in Switzerland, with annual inflation accelerating to 0.8% in August due to higher prices for gasoline, diesel fuel, and heating oil. However, this figure remains significantly below inflation levels in the U.S., U.K., and eurozone.
One factor behind low inflation is the Swiss franc's status as a safe-haven currency, which creates deflationary pressure by making imports cheaper. Despite market expectations of a hike, traders still expect the regulator to eventually begin a monetary tightening cycle.
Market participants are pricing in an increase in the key rate to at least 0.75% by September next year, while UBS economists previously expected a hike in June 2027. However, they noted that a weaker franc, high oil prices, and the resilience of the U.S. and eurozone economies could bring such a decision closer.