Swiss Inflation Soars to Almost Two-Year High, SNB Faces Rate Decision

The Swiss National Bank is set to make its interest rate decision in September, and recent inflation data suggests that policymakers may be inclined to keep borrowing costs at zero for now. Consumer prices rose 0.8% in August from a year earlier, exceeding every forecast of 16 economists polled by Bloomberg.

This acceleration is the fastest pace since September 2024, and it's largely driven by a weaker franc, which has fed through to consumers with imported products contributing more to inflation than domestic ones. The SNB had predicted a mild, temporary acceleration in consumer-price growth, but this latest reading may indicate that the central bank's target of keeping prices within its 0-2% range will be met sooner rather than later.

Economists at UBS have even boosted their growth forecast for Switzerland, predicting an expansion of 1.8% in 2026, up from 0.7%, as a trade deal with China removes almost all tariffs on Swiss goods bound for Asia's biggest economy. However, the possibility of a rate hike cannot be completely ruled out, according to Thomas Gitzel, chief economist at VP Bank.