The Swiss National Bank (SNB) has lowered interest rates by 25 bps, aligned with market estimates. The central bank stated that monetary policy is stable and appropriate as it assesses the impacts of trade wars on inflation and the global economy.
Breaking Down the Decision
The decision follows a 50-basis-point cut announced by the central bank in December, which at the time exceeded expectations. That also marked the fourth interest rate reduction from the SNB since Switzerland became the first major economy to ease monetary policy in March of last year. ⁽¹⁾
The SNB lowered interest rates to 0.25% as inflation seems to be declining. CPI fell from 0.7% in November to 0.3% in February. ⁽²⁾
Switzerland’s economy expanded in late 2024, where the economy grew by 1.5% in Q4, supported by services and parts of manufacturing, though unemployment edged higher. ⁽³⁾
Chairman Schlegel’s Comments
SNB Chairman Schlegel stated that unemployment may slightly increase due to slowdowns in economic activity abroad, which could impact foreign trade. Domestic demand is expected to be supported by rising wages and easing monetary policy. ⁽⁴⁾
Schlegel indicated that high uncertainty in global trade could affect foreign investments, as increasing trade tariffs might weaken economic growth. The outlook for the global economy remains uncertain, with US inflation expected to stay high. ⁽⁵⁾
The SNB expects inflation to continue downwards, still driven by domestic services. The SNB stated it will continue to monitor economic data and adjust monetary policy if necessary. As for right now, the impact of Trump’s tariffs remains difficult to determine. ⁽⁶⁾
While the SNB did not comment on the value of the Swiss Franc, it will continue to use foreign currency interventions if needed. Schlegel stated that the SNB is not a currency manipulator and has never used interventions to gain a competitive advantage but will employ them when necessary to steer monetary policy.
While the currency has weakened this year, it remains vulnerable as a haven for investors guarding against instability, just as US President Trump stirs up global trade tensions. ⁽⁷⁾
What’s Ahead?
The SNB expects global growth to grow at a moderate pace in 2025, with inflation easing in Europe. However, the global outlook remains uncertain due to trade wars and other geopolitical tensions. Trade tariffs could threaten Europe’s economic growth. ⁽⁸⁾
Switzerland’s economy expanded in Q4 2024, supported by strong growth in services and manufacturing. The SNB forecasts GDP growth between 1-1.5% in 2025, driven by higher wages and easier monetary policy.
GDP is expected to grow around 1.5% in 2026, though foreign trade might be heavily affected by weak global economic activity. The SNB forecasted inflation to remain stable near 0.4% for 2025, 0.8% for 2026 and 2027. ⁽⁹⁾
The SNB will continue to closely monitor the situation and adjust its monetary policy if needed as external factors could pose risks to Switzerland’s economy.
