Swiss National Bank keeps key rate at 0% while raising 2026 growth forecast

Rate decision and monetary policy stance

The Swiss National Bank kept its benchmark policy rate at 0% on Thursday, maintaining the level in place since June 2025. The outcome aligned with market expectations, where pricing had indicated a 94% probability of no change, and matched forecasts from all economists surveyed by Reuters. Under the monetary framework, sight deposits held by commercial banks at the central bank will continue to be remunerated at the policy rate up to a designated threshold, while balances exceeding the limit remain at 0.25 percentage points.

SNB President Martin Schlegel explained the assessment during a morning press conference at the Kaiserhaus in Bern. The governing board reiterated its readiness to manage currency volatility as economic conditions require.

Medium-term inflationary pressure has increased only slightly. Monetary policy is appropriate to keep inflation within the range consistent with price stability and supports economic development.

Growth and inflation projections

Alongside the rate decision, the central bank upgraded its assessment for domestic economic growth in 2026. The SNB now expects Swiss gross domestic product to expand within a range of 1.5% to 2.0% this year, an upward revision from the approximately 1% growth forecast published in mid-June. Projected economic growth for 2027 remained steady at roughly 1.5%.

The bank also updated its conditional inflation trajectory across the three-year forecast horizon, assuming the policy rate remains at 0%. Annual inflation is projected at 0.7% for 2026, revised upward from the previous estimate of 0.6%. Projections for 2027 and 2028 were set at 0.8%, up from earlier forecasts of 0.6% and 0.7% respectively.

Geopolitical pressures and domestic prices

The modest rise in consumer prices follows escalating geopolitical tension in the Middle East, specifically the conflict in Iran, which has driven up international crude oil prices. Swiss headline inflation reached 0.8% in August, doubling from 0.4% in the previous month. The SNB noted that goods inflation moved into positive territory in August for the first time since May 2024, reflecting higher costs for petroleum products and fuel.

Despite the uptick, inflation remains inside the central bank's defined price stability target band of 0% to 2%. The central bank stated that energy-driven price pressures are expected to persist into the fourth quarter of 2026 before easing in the course of 2027.

Widening interest rate differentials and currency moves

The decision to maintain a zero-rate policy sets Switzerland apart from several international peers that have tightened monetary conditions. The US Federal Reserve raised its policy rate last week to a target range of 3.75% to 4.00%, while the European Central Bank raised its deposit rate to 2.5%. This policy divergence created a 2.5 percentage point interest rate gap between the SNB and the ECB, the largest difference since the creation of the euro.

Analysis from Raiffeisen Economic Research indicated that financial markets project the gap between Swiss and euro area rates could widen to 3 percentage points over the next twelve months. Over the past three months, the Swiss franc lost nearly 2% of its value against both the euro and the US dollar. Following Thursday's announcement, the franc traded roughly flat at 0.9395 francs per euro and 0.8247 francs per US dollar. Philipp Burckhardt, an investment expert at Lombard Odier, stated that Switzerland is likely to follow global central banks with rate hikes by next year at the latest.