The Swiss National Bank (SNB) has cut its policy rate by 25 basis points to 0.00%, marking its sixth consecutive cut since March 2024 and bringing borrowing costs to the brink of negative territory. The move responds to falling inflation—now at -0.1% in May—as well as the continued strength of the Swiss franc and heightened global economic uncertainty. Notably due to escalating trade tensions. Policymakers emphasized that inflation is expected to remain below target over the short term, prompting this preemptive easing to support price stability without overburdening the economy. The SNB also reaffirmed its readiness to intervene in FX markets if needed.
In the post-decision press conference, Chairman Martin Schlegel stated that the SNB is “now on the verge of negative interest rate territory,” a tool that had previously played a critical role, though he acknowledged its undesirable side effects. Schlegel and fellow policymakers Andrea Maechler, Tschudin, and Martin highlighted growing global risks—especially from trade disputes—that are dampening Swiss and global growth prospects and increasing financial market volatility. They also noted that Switzerland’s interest rate environment is beginning to weigh on banks’ profitability.
Despite the rate cut, the Swiss franc remains one of the strongest G10 currencies, reflecting safe-haven demand. The EURCHF pair dipped by 0.33% to 0.93841, approaching its lowest levels in months. The SNB anticipates subdued economic growth in the second half of 2025, and inflation is projected to remain well below 1% through 2027.
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