The Swiss National Bank (SNB) has maintained its key interest rate at zero, the lowest amongst major central banks. This decision comes as the central bank cautioned that tariffs imposed by U.S. President Donald Trump have clouded the economic outlook for Switzerland heading into 2026. The SNB’s decision to hold steady on its policy rate was widely anticipated by markets, with a Reuters poll indicating the same. This decision marks the first hold in seven meetings by the SNB, following a series of rate reductions that commenced in March 2024. The SNB, is Switzerland’s central bank, responsible for the nation’s monetary policy and currency issuance. They strive to ensure price stability and support the Swiss economy.
The announcement marks the SNB’s initial rate decision since Trump implemented a 39% tariff on Swiss goods exported to the United States in August. In response to the decision, the Swiss franc initially gained strength but later relinquished those modest gains, trading relatively steadily against the euro. The SNB highlighted that companies in the machinery and watchmaking sectors are particularly vulnerable to the tariffs, while the impact on other industries, especially in services, has been limited.
According to the SNB, the economic outlook for Switzerland has deteriorated due to the significantly higher U.S. tariffs. It anticipates that these tariffs will likely suppress exports and investment. Consequently, the SNB now projects growth of just under 1% for 2026, down from the previous estimate of between 1% and 1.5%. The Swiss government is reportedly engaged in negotiations with the Trump administration to seek a reduction in the tariff rate.
SNB Chairman Martin Schlegel reiterated the high threshold for reintroducing negative interest rates, a policy previously used from December 2014 to September 2022. However, Schlegel affirmed that the central bank stands ready to cut rates again if deemed necessary. Meanwhile, Swiss inflation has returned to the SNB’s target range of 0-2% in recent months, after experiencing negative inflation in May. The SNB maintains its view that inflation will gradually increase to 0.5% in 2026 and 0.7% in 2027, following a projected rate of 0.2% this year.
