SNB Holds at 0%, Sees Energy-Driven Inflation as Temporary

The Swiss National Bank left its policy rate at 0% on Thursday, a decision fully priced by markets. Inflation hit 0.6% in May, up from 0.1% in February. The SNB called the move energy-driven and temporary. Policymakers said “medium-term inflationary pressure… is virtually unchanged” and that current settings keep price stability intact.

The franc dominated the statement. The SNB repeated its “increased willingness to intervene in the foreign exchange market” and said it would act against a “rapid and excessive appreciation of the Swiss franc.” The bank has long viewed a strong franc as a bigger risk than inflation. A stronger currency pushes down import prices, making it harder to hit the inflation target. Thursday's language confirmed that stance.

The central bank's new projections show inflation averaging 0.6% in 2026 and 2027, then 0.7% in 2028. Every year stays within the SNB's definition of price stability. Rates can therefore sit at 0% for an extended period. The bank said the inflation path assumes energy price effects fade over time.

The statement also highlighted uncertainty from the Middle East and commodity markets. Still, the SNB described the Swiss economy as resilient, even with unemployment ticking up in recent months.

Traders said the policy divergence between the SNB and other major central banks has market consequences. Switzerland's ultra-low rates make the franc a preferred funding currency for carry trades. The SNB's intervention threat adds a ceiling on franc appreciation, they said, which keeps EUR/CHF supported. Speculative positioning data is available through weekly COT data. The currency strength meter shows the franc's relative performance against peers. The next rate decision is scheduled for September.