SNB Leaves Interest Rate at 0.00%

The Swiss National Bank (SNB) has kept its policy rate unchanged at 0.00% at its latest monetary policy assessment, thereby ending a streak of six consecutive rate cuts for the time being. The message is clear: a return to negative interest rates would require clearly identifiable deflation risks or a significant economic downturn. While the US-imposed tariffs are tangibly impacting certain sectors and have contributed to downward revisions of growth forecasts, the SNB does not consider this sufficient reason to immediately deploy its interest rate policy tool again. Instead, the central bank is taking a wait-and-see approach and only foresees further measures if clear economic signals emerge.

Next rate move: -0.50% or a prolonged pause

Interest rate cuts into negative territory have only limited effectiveness. As a result, any future measures would likely need to be larger in scale. At the same time, from the SNB’s perspective, price stability is considered assured in the medium term – even if inflation temporarily hovers at or below zero. In concrete terms, this means that the next logical step would be either an extended pause or a cut of 0.50%.

Market reaction

The immediate reaction in financial markets has been muted. Both the yield curve and the Swiss franc have remained virtually unchanged compared to the previous day. Stock markets have also shown little response to today’s interest rate decision, with the Swiss market trading lower due to a generally weak opening.

Further appreciation pressure on the Swiss franc

So far, previous rate cuts have done little to weaken the franc. Against the euro, the currency remains stable; against the US dollar, the franc has even appreciated further since June. This development is driven on the one hand by market expectations of lower Fed rates, and on the other hand by the absence of additional SNB measures such as deeper negative rates or systematic foreign exchange interventions in the near term. Today’s decision reinforces this assessment and suggests that the franc may face continued appreciation pressure.

Mortgages and real estate benefit

Even without new negative interest rates, the low interest rate environment remains in place. For homebuyers, this means continued attractive financing conditions, which—coupled with rising rents—highlight the financial advantages of home ownership and are likely to support demand. Institutional investors are already subject to negative deposit rates, and the limited appeal of the Swiss bond market is prompting a shift toward real estate and mortgage investments.

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Bild 1: Kaum Reaktion am Swap-Markt auf den SNB-Entscheid

Zinsswap-Kurve im Vergleich

Source: Bloomberg, smzh

Image 2: Weak US dollar, stable euro

Development exchange rate since June rate cut

Source: Bloomberg, smzh

Comment Bekim Laski, CFA, CIO

Overall, Switzerland is already experiencing an “investment emergency,” as fixed-income bonds with positive yields have become scarce. This presents a challenge for both savers and investors. In such an environment, diversified, return-oriented strategies are advisable. These include Swiss dividend stocks, high-quality high-yield and emerging market bonds, real estate investments, and allocations to private markets as part of a balanced portfolio. Currently, the franc is being driven more by external factors than by the domestic economy. As a result, negative interest rates can only partially influence the franc. Should the SNB need to return to negative rates, a larger move of 0.50% would appear most likely—further increasing the challenges for Swiss investors.

Comment Burak Er, CFA, Head Research & Advisory Solutions

The US tariffs are noticeably slowing the Swiss economy, and lower import prices could once again push inflation below zero. This would increase the pressure on the SNB to take monetary policy action. However, there is currently no urgent need to act. Today’s decision instead signals that we are likely to remain in a low-interest-rate environment for some time. Even long-term rates are expected to continue moving toward zero. This is an especially attractive scenario for real estate owners and investors. For savers, however, the recent period of higher interest rates has already come to an end – almost as soon as it began.