Swiss National Bank holds rates at 0% as inflation stays low

Switzerland’s central bank kept its key interest rate at 0% on Thursday, defying the tightening cycle that has begun among many of its major peers.

But market watchers say it’s only a matter of time before it’s forced into raising rates.

Thursday’s decision marked a divergence from policy decisions by the banks of Switzerland’s major trading partners: the European Central Bank, the U.S. Federal Reserve and the Bank of Japan, which have all begun raising interest rates to ward off rising inflation.

The central banks of Canada and the U.K., also major trading partners, are expected to follow suit later this year.

The unique Swiss economy has kept it somewhat insulated from the inflationary surge seen in neighboring nations and economic peers. In August, Switzerland’s annual inflation rate ticked up to 0.8%, pushed higher due to rising gasoline, diesel and heating oil costs — but it’s a far cry from levels seen in the U.S., U.K. and euro zone.

Their respective central banks have inflation targets of 2%, while the SNB’s objective is to keep inflation between 0% and 2%.  

The SNB is widely expected to eventually embark on its own hiking cycle. Traders are pricing odds of a hike versus a hold at close to 50-50 in December — and more than a 90% chance the SNB will begin hiking by early 2027.

LSEG’s data shows traders are betting on the SNB’s key rate rising to at least 0.75% by next September.

One of the factors that helps keep inflation low is the Swiss franc’s safe-haven status. The currency’s strength puts deflationary pressure on the country. As the currency appreciates, imports — which play a significant role in the economy — become cheaper.

Because of the franc’s potential to curb inflation and economic activity if it appreciates suddenly or excessively, the SNB also monitors exchange rates in its task of maintaining “appropriate monetary conditions.”

As investors sought protection from widespread market volatility in 2025, the Swiss franc rose more than 12% against the dollar — but the greenback has clawed back around 4% against the franc so far this year.