Swiss Central Bank Keeps Key Interest Rate At Zero

(RTTNews) - The Swiss National Bank decided to hold its benchmark rate and signaled increased willingness to intervene in the foreign exchange market to counter the excessive appreciation of currency amid the conflict in the Middle East. The central bank left its policy rate at zero percent on Thursday, in line with market expectations.

The SNB had reduced the key rate by 175 basis points since March 2024. The bank exited its negative rate in 2022 after holding it for over seven years.

Banks' sight deposits held at the central bank will be remunerated at the SNB policy rate up to a certain threshold. The discount for sight deposits above this threshold still stands at 0.25 percentage points, the bank said.

"Given the conflict in the Middle East, the SNB's willingness to intervene in the foreign exchange market has increased," the bank said. The SNB said it counters a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in the domestic economy.

Inflation is forecast to increase more strongly in the coming quarters due to the rise in energy prices amid the escalation in the Middle East.

The bank lifted its inflation forecast for 2026 to 0.5 percent from 0.3 percent but lowered the estimate for 2027 to 0.5 percent from 0.6 percent. The rate was projected at 0.6 percent in 2028.

Policymakers observed that the economic outlook has become considerably more uncertain with the conflict in the Middle East. Economic growth could be rather subdued with a certain upturn to be expected in the medium term, the bank noted.

GDP growth is projected at around 1 percent this year, unchanged from the prior outlook. This will be followed by around 1.5 percent growth in 2027, the bank said.