The Swiss National Bank left its policy interest rate unchanged today, saying a recent agreement to reduce US tariffs on Swiss goods had improved the economic outlook, even as inflation has somewhat undershot expectations.
The SNB kept its interest rate at 0%, the lowest among major central banks, for the second consecutive policy meeting, a decision expected by markets and analysts polled by Reuters.
The decision comes against the backdrop of a sluggish Swiss economy, which contracted by 0.5% in the third quarter, and after inflation unexpectedly declined in November to 0%, the bottom end of the SNB's 0-2% target range.
"Inflation in recent months has been slightly lower than expected. In the medium term, however, inflationary pressure is virtually unchanged compared to the last monetary policy assessment," the SNB said in a statement.
The latest SNB decision followed a rate cut by the US Federal Reserve last night.
It was also the Swiss central bank's first policy meeting since Switzerland in November reached a deal with Washington that reduced additional US tariffs on Swiss goods to 15% from the initially imposed 39%.
"The economic outlook for Switzerland has improved slightly due to the lower US tariffs and somewhat better development globally," the SNB said.
The tariffs have hurt economic growth at a time when the Swiss franc's strength, fuelled by safe-haven flows during the trade turmoil, pushed down inflation by making imports cheaper.
Analysts say the lower tariffs will lessen the economic damage for Switzerland, which faced being shut out of one of its largest markets for watches, chocolate and machinery.
"Today's decision is not a surprise, and is exactly what the market expected," said Gian Luigi Mandruzzato, an economist at EFG Bank.
"Swiss inflation has been low, but the SNB sees this as a temporary phenomenon and driven by factors outside its control, like oil prices," he said.
Mandruzzato said economic sentiment has also improved since the third quarter.
"The reduction of US tariffs and positive data from Europe look supportive for the Swiss economy," he said.
The SNB slightly revised down its Swiss inflation forecasts for the coming quarters, but still expected the rate to gradually tick up to 0.7% by the end of 2027.
"The forecast is within the range of price stability over the entire forecast horizon," the SNB said.
