Switzerland Holds Policy Rate at 0% as Inflation Stays Low

The Swiss National Bank (SNB) kept its policy rate at 0% on Sept. 24, preserving Switzerland’s lower-rate stance as subdued inflation and a firm franc limit price pressures.

The decision came at 3:30 a.m. ET (07:30 UTC). Switzerland’s annual inflation rate was 0.8% in August, while consumer prices increased 0.4% from the previous month.

The SNB defines price stability as inflation between 0% and 2%. The latest reading therefore remains within the central bank’s stated range and below its upper limit.

Switzerland has maintained a lower policy rate than larger economies because inflation remains contained. A firm franc makes imported goods cheaper and has contributed to lower inflation pressure.

At 0%, the policy rate is negative in real terms when measured against current inflation. With consumer prices rising 0.8% annually, the implied real interest rate is -0.8%.

The policy divergence could narrow if the franc weakens further, energy prices rise or inflation expectations increase. The currency’s recent weakening could increase inflation pressure, making exchange-rate conditions an important part of the SNB’s monetary-policy assessment.

The SNB monitors exchange rates as part of maintaining appropriate monetary conditions. For now, the central bank has kept rates unchanged while inflation remains inside its price-stability range.