Swiss National Bank Cuts Rates to 0% Amid Easing Inflation and Global Uncertainty

In its latest policy announcement, the Swiss National Bank (SNB) has lowered its policy rate by 0.25 percentage points, bringing it down to 0% effective June 20, 2025, as the central bank reacts to declining inflationary pressures and shifting economic conditions.

The SNB’s decision comes as inflation in Switzerland has turned slightly negative, with May's figure at -0.1%, mainly due to lower prices in tourism and oil products. The bank’s updated inflation forecast is now 0.2% for 2025 and is expected to gradually rise to 0.7% by 2027, assuming the policy rate stays at 0%. This monetary easing is intended to maintain inflation within the desired range of price stability, while allowing room to adjust policy further if necessary.

On the global front, economic momentum weakened in the first quarter of 2025, although growth was temporarily boosted by exports brought forward ahead of higher US tariffs. The SNB anticipates slower worldwide growth in coming quarters due to rising trade tensions, higher US tariffs, and cooling global investment, with inflation diverging between the US and Europe. Switzerland’s own economy experienced robust growth early in the year, but this was heavily influenced by front-loaded exports; growth is expected to moderate for the rest of 2025, with GDP forecast in the 1% to 1.5% range and a slight increase in unemployment likely.

The SNB’s annual Financial Stability Report highlights continued volatility in financial markets and persistently low profitability for Swiss banks. The report underscores progress in regulatory reforms since the Credit Suisse crisis, ongoing credit market dynamics following the bank’s acquisition by UBS, and the growing importance of non-bank financial intermediaries such as investment and pension funds. These trends call for robust capital and liquidity buffers as well as concerted regulatory efforts to safeguard financial stability.

The SNB’s rate cut marks a significant move to support price stability and economic resilience as Switzerland navigates a challenging global landscape marked by trade disputes, market volatility, and sector-specific vulnerabilities.