[ZURICH] The Swiss National Bank (SNB) held its key interest rate at zero on Thursday (Sep 25), the lowest among major central banks, as it warned that US President Donald Trump’s tariffs had dimmed the outlook for the Swiss economy going into 2026.
The SNB kept its policy rate at 0 per cent, as expected by markets and a Reuters poll, helped by a small uptick in inflation in recent months. It was the first hold in seven meetings by the SNB, after it started reducing borrowing costs in March 2024.
SNB chairman Martin Schlegel has repeatedly said there were high hurdles to reintroducing a negative interest rate, a policy which sparked concerns from savers and pension funds when used from December 2014 to September 2022.
The announcement was the SNB’s first monetary policy decision since Trump slapped a 39 per cent tariff on Swiss goods exports to the US in August.
The SNB said companies in the machinery and watchmaking sectors are particularly affected by tariffs but that the impact on other industries – notably in services – has been limited.
“The economic outlook for Switzerland has deteriorated due to significantly higher US tariffs. The tariffs are likely to dampen exports and investment especially,” it said.
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Due to the tariffs and the high level of uncertainty, the SNB now expects growth of just under 1 per cent for 2026. In this environment, unemployment is likely to continue rising, it said.
The SNB’s decision comes a week after the US Federal Reserve cut its rates to head off the risk of rising unemployment and indicated more cuts could follow.
The European Central Bank meanwhile left its interest rate unchanged in September, pausing its recent round of rate cuts, although discussions about rate cuts were not over.
The SNB’s decision to keep rates on hold did not surprise analysts, who also highlighted the Swiss franc’s relative stability versus the euro as a reason to stay on hold.
“It was no surprise the SNB left rates unchanged at 0 per cent,” said GianLuigi Mandruzzato, an economist at EFG Bank.
“The decision reflects the return of inflation within the SNB’s 0-to-2 per cent target range, the expectation that it will move closer to the mid-point of the target range in coming years and that the Swiss economy will continue to grow moderately.”
Meanwhile Swiss inflation has returned to the SNB’s 0-to-2 per cent target range in the last three months after trending lower and turning negative in May. REUTERS
