The Swiss National Bank held its key interest rate at zero today, the lowest among major central banks, as it warned that US President Donald Trump's tariffs had dimmed the outlook for the Swiss economy going into 2026.
The SNB's decision to keep its policy rate at 0% had been widely expected by markets and a Reuters poll, and was helped by a small uptick in inflation in recent months.
It was the first hold in seven meetings by the SNB, after it started reducing borrowing costs in March 2024.
The announcement was the SNB's first rate decision since Trump slapped a 39% tariff on Swiss goods exports to the US in August.
The SNB said companies in the machinery and watchmaking sectors are particularly affected by tariffs but that the impact on other industries - notably in services - has been limited.
"The economic outlook for Switzerland has deteriorated due to significantly higher US tariffs. The tariffs are likely to dampen exports and investment especially," it said.
Due to the tariffs and the high level of uncertainty, the SNB now expects growth of just under 1% for 2026. In this environment, unemployment is likely to continue rising, it said. It had previously seen growth of between 1% and 1.5% next year.
The Swiss government is currently trying to negotiate a lower tariff rate with the Trump administration.
The SNB's decision comes a week after the US Federal Reserve cut its rates to head off the risk of rising unemployment and indicated more cuts could follow.
The European Central Bank meanwhile left its interest rate unchanged in September, pausing its recent round of rate cuts, although discussions about rate cuts were not over.
The SNB's decision to keep rates on hold did not surprise analysts, who also highlighted the Swiss franc's relative stability versus the euro as a reason to stay on hold.
"It was no surprise the SNB left rates unchanged at 0%," said Gian Luigi Mandruzzato, an economist at EFG Bank.
"The decision reflects the return of inflation within the SNB's 0-2% target range, the expectation that it will move closer to the mid-point of the target range in coming years and that the Swiss economy will continue to grow moderately," the economist added.
SNB Chairman Martin Schlegel has repeatedly said there are high hurdles to reintroducing a negative interest rate, a policy which sparked concerns from savers and pension funds when used from December 2014 to September 2022.
Swiss inflation has returned to the SNB's 0-2% target range in the last three months after turning negative in May. The SNB today maintained its view that inflation would tick up to 0.5% in 2026 and 0.7% in 2027 after reaching 0.2% this year.
However, despite its decision to hold rates, some analysts believe the SNB will have to go lower in due course.
"We do not think that this is the end of the rate cutting cycle," said Adrian Prettejohn, Europe economist at Capital Economics.
"We think that inflation is likely to average around zero next year, prompting the SNB to cut rates in the coming quarters to reduce the risk of deflation," he added.
