This suggests that the SNB’s decision focused on risks that could depress inflation in the longer term, like the uncertainties about US trade policy. The introduction of tariffs on US imports could slow global GDP growth with potentially adverse consequences for a small open economy like Switzerland. As a result, the probability of lower-than-expected inflation would rise.
The SNB does not, however, ignore the possibility that a more expansionary fiscal policy, particularly in Germany, could lead to stronger-than-expected growth in the eurozone. As the latter is Switzerland’s first trading partner, Swiss growth would also benefit, possibly pushing inflation above the SNB’s forecast.
Thus, the SNB's monetary policy outlook is particularly uncertain. It is notable that if the central bank's forecasts are correct, the real policy rate, adjusted for the inflation rate, will become negative from the second half of 2025 (see Chart 1). The policy rate could be raised if the SNB's monetary policy risks becoming excessively expansionary.
However, if the shocks to Swiss inflation were mainly due to external factors, such as US trade policies, foreign exchange interventions will likely return to play a prominent role in the SNB's strategy. After buying just CHF 1.2 bn in the whole of 2024 (see Chart 2), the SNB could sell foreign currencies to strengthen the franc if inflation rises too high or buy them to weaken it if inflation proves too low, although likely less aggressively than in the past.
