By Tuba Ongun
In a widely anticipated move, the Swiss National Bank (SNB) reduced its policy rate by 25 basis points to 0.25%, amid subdued inflationary pressures and heightened downside risks.
The bank underlined that it would closely monitor economic developments and adjust monetary policy as needed to ensure inflation remains consistent with medium-term price stability.
Since the SNB’s last monetary policy assessment, inflation has aligned with expectations, dropping from 0.7% in November to 0.3% in February thanks to a sharp reduction in electricity prices in January. However, domestic services remain the primary driver of inflation.
In updated forecasts, the SNB projected inflation at 0.4% for 2025, down from a previous estimate of 1.1%. Inflation expectations for 2026 and 2027 are now 0.8%, with 2026's forecast revised up from 0.3%, while the 2027 outlook remains unchanged.
The bank projects GDP growth of 1% to 1.5% for 2025, supported by rising real wages and the effects of the recent rate cut on domestic demand.
However, sluggish economic activity abroad is expected to weigh on foreign trade, and unemployment is forecasted to rise slightly. The GDP growth is projected to reach around 1.5% by 2026.
The bank raised the rate from minus 0.75% to 1.75% gradually between the second quarter of 2022 and the second quarter of 2023, maintained that rate through 2024, and began lowering it continuously at the start of 2024.
The SNB was the first major central bank to lower rates following the monetary tightening process related to the pandemic.