The Swiss National Bank (SNB) has reduced its key interest rate to 0% from 0.25%, citing a decline in inflation and pressure from a strengthening Swiss franc. This move marks the sixth consecutive rate cut since March 2024. The SNB’s decision aims to counter lower inflationary pressure, with the central bank noting that the global economic outlook has deteriorated due to increased trade tensions.
According to the SNB, the Swiss economy’s growth was strong in the first quarter, largely due to exports to the United States being brought forward ahead of US President Donald Trump’s tariff manoeuvres. However, stripping out this factor, growth was more moderate and is likely to slow again and remain subdued for the rest of the year. The SNB expects GDP growth of 1% to 1.5% for both 2025 and 2026, with Swiss unemployment likely to continue rising slightly.
The SNB’s decision to cut rates was widely expected by analysts. Adrian Prettejohn, Europe economist at Capital Economics, said the SNB might move rates to negative 0.25% at its September meeting due to deflation. “There are also significant downside risks to inflation from trade tensions as well as heightened geopolitical uncertainty, which could push up the value of the franc further,” he added.
The Swiss franc’s appreciation, which has gained roughly 11% against the US dollar in 2025, has lowered import costs and thus inflation. However, economists warn that continued currency strength could undermine exporters and weigh on growth. The SNB has reiterated its readiness to intervene in foreign exchange markets if needed, while remaining wary of being labelled a currency manipulator.
The SNB has lowered its inflation forecast for 2025 from 0.4% to 0.2% and for 2026 from 0.8% to 0.5%. The consumer price index even fell into negative territory in May, at -0.1%. The central bank’s decision to cut rates aims to ensure price stability, with the SNB remaining willing to be active in the foreign exchange market as necessary.
The SNB’s move comes as other global central banks are easing monetary policy amid weakening growth. Norway’s central bank recently cut interest rates, while the European Central Bank lowered rates earlier in June. The US Federal Reserve, however, held interest rates steady at a range between 4.25% and 4.5%.