SNB keeps rates at 0%, readies FX intervention on franc
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- Swiss National Bank kept its main policy rate at 0%, as widely expected, while signaling increased willingness to intervene in FX markets against any "rapid and excessive appreciation" of the franc.
- SNB Chairman Martin Schlegel said the Feb. 28 Middle East conflict initially drove franc upward via safe-haven demand, though pressure has since eased; he warned the risk of renewed franc strength persists amid geopolitical uncertainty.
- Swiss inflation rose to 0.6% in May from 0.1% in February, driven by higher energy prices tied to the Iran conflict, though the SNB said medium-term inflationary pressure was virtually unchanged.
- Swiss growth is forecast at roughly 1% in 2026 and 1.5% in 2027, with the SNB citing U.S. trade policy and Middle East uncertainty as the key risks to its outlook.
- Interest rate differentials have widened as the ECB hiked 25bps to 2.25% and the Fed held at 3.5%-3.75% while hinting at future hikes, causing some franc depreciation but leaving the franc vulnerable to flight-to-safety spikes.
- U.S. President Donald Trump has previously criticized SNB currency strategy, and the U.S. imposed a 39% tariff on Switzerland last year citing currency manipulation and trade barriers — intervention now risks further friction with Washington.
Why it matters: The SNB is trapped between opposing forces: widening rate differentials pulling the franc lower and Middle East-driven safe haven flows that could spike it higher. Any fresh intervention to weaken the franc risks reigniting U.S. accusations of currency manipulation that already underwrote Switzerland's 39% tariff — meaning Switzerland's monetary policy is now directly entangled with Trump's trade policy.
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