The Swiss National Bank (SNB) decided to keep its benchmark interest rate at 0%, which is currently the lowest in the world. This decision was widely anticipated by economists, including those surveyed by Reuters, ING, and UBS.
The SNB also adjusted its stance on foreign exchange intervention. Previously, the bank had expressed an "increased willingness to intervene" to counter franc appreciation. However, with the franc weakening by approximately 2% against the euro since the last meeting, and reaching a 17-month low against the euro and its weakest level against the dollar since June of the previous year, policymakers are expected to revert to more balanced language, stating that the SNB stands ready to intervene if necessary. This shift in commentary is considered more significant for EUR/CHF positioning than the rate decision itself.
Despite rising inflation, largely driven by higher energy prices and a weaker franc, Swiss inflation remains within the SNB's target range of 0-2%, reaching 0.8% in August. The updated inflation projections are expected to be mildly revised higher. The SNB's approach contrasts with other central banks like the US Federal Reserve and the European Central Bank, which have been tightening monetary policy. Some economists, such as Ipek Ozkardeskaya from Swissquote, suggest that the SNB has the luxury to wait and observe the economic situation before making significant policy changes. Brian Mandt of Luzerner Kantonalbank predicts a first rate hike in March, while most economists do not expect a move before 2028, aligning with the SNB's own internal projections from July that rates would stay at zero through the end of 2027.
