Switzerland: Swiss National Bank holds rates in March
Latest bank decision: At its meeting on 19 March, the Swiss National Bank (SNB) held the policy rate at 0.00%.
SNB in wait-and-see mode: The Bank’s decision to hold was likely motivated by the desire to assess the impact of the 175 basis points of rate cuts implemented since early last year. Inflation is currently low but positive, with elevated international uncertainty driven by war in the Middle East a further reason to stay on hold.
Bank likely to remain on hold: Most panelists predict rates will stay unchanged until end-2026 given moderate inflation and economic growth provide little pressure to hike or cut. One panelists forecasts a 25 basis-point cut to prop up price pressures.
Panelist insight: On the relevance of war in the Middle East, ING’s Charlotte de Montpellier said:
“An energy shock is structurally a less acute problem for inflation in Switzerland than in the euro area, for two main reasons. On the one hand, the direct weight of energy in the Swiss consumer price index (CPI) is relatively limited (5% versus 9% on average in the euro area), which mechanically reduces the impact of a rise in energy prices on headline inflation. On the other hand – and above all – the appreciation of the Swiss franc in periods of uncertainty, due to its role as a safe haven, plays a central cushioning role. First, on energy prices themselves. The increase in Brent prices in dollars or gas prices in euros is less pronounced once converted into Swiss francs. But also because, as a small open economy, Switzerland is very sensitive to the imported price channel: imports represent 22% of the consumer price basket, meaning that a strong franc exerts significant downward pressure on imported inflation, well beyond energy prices.”