| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| Change | 0bp | -25bp to 0bp | 0bp | -25bp |
| Level | 0.0% | -0.25% to 0.0% | 0.0% | 0% |
Highlights
The Swiss National Bank decided not to push rates into negative territory following its September meeting, leaving the rate on sight deposits which banks keep at the SNB at 0.0 up to a determined threshold. The discount rate for sight deposits above the limit was held at 0.25 percent.
Switzerland's central bank also specifically mentioned US tariffs, noting the global economy is being hobbled by the levies. A high degree of uncertainty remains and that barriers could in fact be raised further. Still, the SNB said the global economy could provide more resiliency than anticipated.
For the Swiss economy in particular, tariffs are the main risk, likely further dampening exports and investment, with watchmakers and manufacturers of machinery particularly hard hit. The services industry has been mostly spared, which should help the economy to remain stable amid some moderate growth. The SNB is forecasting growth between 1.0 to 1.5 percent this year and slowing to 1.0 percent next year.
The Swiss franc remains strong, with the SNB reiterating it's willing to remain active in the foreign exchange markets. One option available to help ease the tariff impacts are devaluing the Swiss franc, although that would make imports more expensive. However, with inflation presently under control, it's certainly an option for the SNB. This year, inflation is expected to be 0.2 percent, rising to 0.5 percent in 2026, and increasing again in 2027 to 0.7 percent.
Today's decision shows a cautious SNB weighing its options and seeing how conditions develop around tariffs. In the United States, an appeals court upheld the decision of a trade court declaring most of the tariff's illegal. That is expected to reach the US Supreme Court in October or November which is before the governing board meets again in December to decide on rates.
Switzerland's central bank also specifically mentioned US tariffs, noting the global economy is being hobbled by the levies. A high degree of uncertainty remains and that barriers could in fact be raised further. Still, the SNB said the global economy could provide more resiliency than anticipated.
For the Swiss economy in particular, tariffs are the main risk, likely further dampening exports and investment, with watchmakers and manufacturers of machinery particularly hard hit. The services industry has been mostly spared, which should help the economy to remain stable amid some moderate growth. The SNB is forecasting growth between 1.0 to 1.5 percent this year and slowing to 1.0 percent next year.
The Swiss franc remains strong, with the SNB reiterating it's willing to remain active in the foreign exchange markets. One option available to help ease the tariff impacts are devaluing the Swiss franc, although that would make imports more expensive. However, with inflation presently under control, it's certainly an option for the SNB. This year, inflation is expected to be 0.2 percent, rising to 0.5 percent in 2026, and increasing again in 2027 to 0.7 percent.
Today's decision shows a cautious SNB weighing its options and seeing how conditions develop around tariffs. In the United States, an appeals court upheld the decision of a trade court declaring most of the tariff's illegal. That is expected to reach the US Supreme Court in October or November which is before the governing board meets again in December to decide on rates.
Market Consensus Before Announcement
Expectations call for the SNB to keep rates steady at zero after cutting by 25 bp last time.
Definition
The Swiss National Bank (SNB) usually announces any changes to its monetary stance at its quarterly Monetary Policy Assessment. However, adjustments can be made at any time. Since 2000 monetary policy has consisted of the following three elements: a definition of price stability, a medium-term inflation forecast and a target range for a reference interest rate, the three-month Swiss franc Libor (London Interbank Offered Rate). The SNB attempts to secure an annual inflation rate as specified by the consumer price index (CPI) of less than 2 percent. In recent times this has involved sizeable intervention in the foreign exchange market to prevent appreciation of the Swiss franc although since January 2015 there has been no explicit exchange rate target.
Description
The aim of the SNB's monetary policy is to ensure price stability in the medium and long term. By keeping prices stable (2 percent annual inflation rate), the SNB seeks to create an environment in which the economy can fully exploit its production potential. The Bank is required to set its policy to meet the needs of the Swiss economy as a whole rather than the interests of individual regions or industries.
The SNB has traditionally implemented its monetary policy by fixing a target range of 1.0 percentage points at the level deemed appropriate for the three-month Swiss franc Libor. The Bank has then normally sought to hold the rate around the middle of that corridor. However, as a result of strong capital inflows into the local currency prompted by the 2008/09 global downturn, this objective range has been both narrowed and reduced to just 0.0 - 0.25 percent, with a point target of 0.0 percent. In fact, since September 2011 the thrust of policy has been determined largely by the SNB's expressed aim of preventing the CHF strengthening beneath a CHF1.20 floor versus the euro.
The Swiss National Bank publishes its monetary policy assessments on a quarterly basis in March, June, September and December. In these reports it describes the current monetary environment and formulates its monetary policy intentions for the following quarter. It also provides inflation forecasts which help financial markets to formulate of where monetary policy might be headed. Twice a year -- in June and in December -- the Bank holds a media conference. At that time, the Governing Board provides information about the economic situation and comments on its monetary policy.
The SNB has traditionally implemented its monetary policy by fixing a target range of 1.0 percentage points at the level deemed appropriate for the three-month Swiss franc Libor. The Bank has then normally sought to hold the rate around the middle of that corridor. However, as a result of strong capital inflows into the local currency prompted by the 2008/09 global downturn, this objective range has been both narrowed and reduced to just 0.0 - 0.25 percent, with a point target of 0.0 percent. In fact, since September 2011 the thrust of policy has been determined largely by the SNB's expressed aim of preventing the CHF strengthening beneath a CHF1.20 floor versus the euro.
The Swiss National Bank publishes its monetary policy assessments on a quarterly basis in March, June, September and December. In these reports it describes the current monetary environment and formulates its monetary policy intentions for the following quarter. It also provides inflation forecasts which help financial markets to formulate of where monetary policy might be headed. Twice a year -- in June and in December -- the Bank holds a media conference. At that time, the Governing Board provides information about the economic situation and comments on its monetary policy.
