Switzerland has officially re-entered an era of zero interest rates, following a 0.25% cut by the Swiss National Bank (SNB) on 19th June 2025.
The move, though widely expected, marks a significant shift in monetary policy as the nation grapples not with inflation – but deflation.
Consumer prices in May dipped 0.1% year-on-year, driven largely by the enduring strength of the Swiss franc.
The SNB cited diminished inflationary pressure as the rationale behind the cut and indicated it remains focused on long-term price stability.
Chairman Martin Schlegel emphasised that short-term negative inflation readings weren’t the primary motivator. Instead, the Bank revised its inflation forecast down to 0.2% for 2025 and 0.5% for 2026.
Switzerland’s strong currency continues to weigh heavily on imported goods prices – an especially potent factor in a small, open economy.
Analysts suggest the SNB may go lower if inflation fails to rise, sparking speculation about a return to negative rates.
This development sets Switzerland apart from other major economies still battling inflation, underscoring the unique challenge of managing deflation in a world accustomed to rate hikes.
The next SNB policy decision is due in September 2025. Until then, all eyes remain on the franc – and the fallout.