No need for negative SNB rates

Investors expect the Swiss National Bank (SNB) to maintain the policy rate at this week’s meeting at 0%, according to futures contracts on Swiss short-term interest rates. There are several reasons why the SNB will not return to negative interest rates. 

Swiss economy outlook

The most relevant is that is that the latest inflation data were stronger than the SNB’s forecast for Q3 that was made in June of this year. At a modest 0.2% year-over-year (YoY), inflation has returned within the SNB’s 0-2% target range after a brief spell below 0% (see Chart 1).

Chart 1. Swiss CPI inflation rate (yoy)

Source: LSEG Data & Analytics and EFGAM calculations. Data as of 23 September 2025.

Looking ahead, inflationary pressures are expected to remain moderate but may increase gradually in the coming months. The composite Purchasing Managers’ Index (PMI) of purchase prices has risen to the highest since early 2023, driven by developments in the manufacturing sector (see Chart 2). In addition, this likely reflects stabilisation in the Swiss labour market and increased nominal wage growth in early 2025.

Chart 2. Swiss PMI survey - purchase prices

Source: LSEG Data & Analytics. Data as of 23 September 2025.

However, downside risks to inflation have not disappeared. The Swiss franc has appreciated by more than 10% against the USD since Liberation Day and by more than 6% in trade weighted terms. 

The other major risk to Swiss price stability relates to the 39% tariffs announced by the US. So far, the shock appears manageable because gold and pharmaceutical goods, accounting for about two thirds of Swiss exports to the US, are exempt from tariffs, at least for now (see Chart 3). US tariffs will also have little impact on sectors such as luxury watches and precision mechanics in which Swiss companies are leaders and have few competitors.  

Chart 3. Gold and pharma, shares of exports to the US

Source: LSEG Data & Analytics, Global Trade Tracker, and EFGAM calculations. Data as of 23 September 2025.

Additionally, fiscal stimulus in the eurozone, driven by Germany, may offer an offset to US tariffs. With a focus on infrastructure, defence, and the energy transition, it is expected to benefit also the Swiss economy. Overall, Swiss GDP growth will likely remain close to its potential rate of 1.5% in 2025-26. 

Monetary policy outlook

President Schlegel has emphasised that the objective of monetary policy is price stability "in the medium term". Therefore, even if downside risks to the economy materialise, deviations in inflation outside the 0-2% target range can be tolerated by the central bank if they are deemed to be temporary. Schlegel's comments signal that the bar for further cuts to the policy rate below 0% is high. 

In early September, Schlegel also announced that, starting this quarter, the SNB will publish with a four-week delay a summary of the monetary policy meeting. The aim is to increase transparency and to help markets and the public better understand the Bank’s actions. 

This initiative brings the SNB closer to the practice of other major central banks. It remains to be seen how much detail will be provided regarding alternative scenarios and forecasts, and the internal debate surrounding them. Noting that Schlegel has said that the Governing Board takes decisions collectively and jointly supports them afterwards there is a risk that the summary will give little insight into the SNB’s future monetary policy.