On 19 June 2025, the Swiss National Bank (SNB) cut its policy rate by 25 basis points to 0%, effective June 20th. The Bank said the move follows a sustained decline in inflation, which turned negative in May for the first time since 2021. It also reaffirmed its readiness to intervene in currency markets if needed.
The rate cut was intended to counter a weakening inflation outlook. Having dropped from 0.3% in February to -0.1% in May—driven largely by lower oil prices and a softening in tourism—price growth is now firmly below target, said the SNB in a press release.
The SNB now forecasts average annual inflation of 0.2% in 2025, 0.5% in 2026 and 0.7% in 2027, assuming rates remain at zero. Without today’s rate cut, the outlook would have been even lower.
The global economic backdrop remains tepid. Growth continued at a modest pace in the first quarter of 2025, but prospects have dimmed as trade tensions mount. The SNB’s base scenario assumes a further global slowdown in the quarters ahead, with inflation expected to rise in America but fall further in Europe. Risks to this outlook remain high, including the potential for additional trade barriers or unexpected fiscal stimulus, it said.
A currency expert at UBS said the markets were split on whether the Bank would cut the rate by 25 or 50 basis points, so a 25 basis point cut led to a slight strengthening of the franc. Going forward, he said he expects the franc to strengthen against the USD but not against the Euro. Intervention by the SNB to manage the exchange rate would probably only happen if there was a very strong appreciation of the franc over a short period of time, particularly in relation to the Euro. But he doesn’t expect it to constantly intervene like it did 10 years ago when it was trying to maintain a rate of 1.20 CHF to the Euro.
Three years ago, the SNB’s interest rate was set at -0.75% and banks were charging some depositors interest on positive balances. Could this happen again? Probably not over the short term.
More on this:
SNB press release (in French) – Take a 5 minute French test now
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