SNB Cuts Interest Rates to 0.25%

By John Revill
ZURICH (Reuters) – The Swiss National Bank (SNB) has cut its main interest rate to just above zero, now at 0.25%, on Thursday, citing increased uncertainty over the global impact of U.S. President Donald Trump’s trade policies.

The cut, which is the fifth consecutive reduction since March 2024, aligns with economists’ forecasts. The bank observed that inflation is well-contained and might decline further.

Markets expect rates to remain unchanged as the SNB assesses the global economic landscape, where Chairman Martin Schlegel noted significant uncertainties.

Consequently, the Swiss franc weakened slightly against the euro and the dollar post-announcement. Karsten Junius, chief economist at Bank J. Safra Sarasin, commented, “The SNB was not only the first major central bank to start cutting rates in this cycle, with this step today, it likely is also the first to complete rate cuts.”

The current rate of 0.25% is the lowest since September 2022, approaching sub-zero rates, which have not been ruled out by the SNB. Schlegel emphasized that future policy decisions will depend on forthcoming data before the next meeting in June.

Meanwhile, the Bank of England and Sweden’s central bank decided to maintain their key interest rates unchanged. The U.S. Federal Reserve also held rates steady, acknowledging a period of “unusually elevated” uncertainty due to Trump’s trade policies, including tariffs.

Schlegel remarked that the outlook for Swiss inflation remains unclear, primarily due to weaker global economic growth and a possible appreciation of the Swiss franc. He expressed that the current volatility in trade policies complicates the evaluation of the situation.

The rate cut aims to prevent further declines in Swiss inflation, which stood at 0.3% in February, its lowest in nearly four years, while aiming to maintain price stability within the 0-2% target range.

The SNB anticipates moderate global growth in the upcoming quarters, accompanied by gradually easing inflationary pressures, particularly across Europe. However, increasing trade barriers could hinder global growth, while rising government spending may elevate output in Europe.

In addition to utilizing interest rates for inflation control, the SNB does not shy away from foreign currency interventions, despite being labeled a currency manipulator by the U.S. during Trump’s previous administration. Schlegel reiterated, “Switzerland is not a currency manipulator.”

For economic growth, the SNB maintains an expectation of 1% to 1.5% for this year, with a forecast of approximately 1.5% for 2026. However, Petra Tschudin, a governing board member, warned that Switzerland’s economic outlook is now “considerably more uncertain.”