ZURICH. The most revealing sentence in the Swiss National Bank’s newest publication concerns the currency it exists to manage. In the summary of the monetary policy assessment of 22 and 23 September, released on Thursday morning, the governing board notes that the franc depreciated by around 3 per cent in trade-weighted terms between the June and September assessments, and it explains the fall with unusual candour: wider interest rate differentials and low volatility have raised the franc’s attractiveness as a funding currency for carry trades, while safe-haven demand has largely been absent.
In plain language, the market is once again borrowing cheap francs to chase yield elsewhere, and the SNB, which spent a decade fighting franc strength, is content to watch. The franc slipped to a sixteen-month low against the dollar this week, changing hands near 0.82 per dollar, and economists at UBS now see a chance the first rate rise comes earlier than their base case of June 2027. Interest rate futures put the odds of a move as early as the December assessment well above zero.
A world of rising rates, a country at zero
The backdrop the summary sketches is a global economy that is robust but repricing. Renewed tensions in the Middle East, tighter monetary policy abroad, rising energy prices and heavier inflation expectations pushed market interest rates up worldwide over the summer, while equity markets stayed firm on solid corporate results in energy and American technology. The board also noted the sheer volume of bond issuance by companies building out artificial intelligence, a new force in global rate markets. Against that, Swiss inflation of 0.8 per cent, driven mainly by energy, left the three members, Schlegel, Antoine Martin and Petra Tschudin, free to hold at zero and wait.
The economy can take it
Domestically the picture supports patience. Second-quarter growth was solid and broad-based, the summary says, even as manufacturing capacity use stayed below average and unemployment edged up. The SNB raised its forecast in September to growth of between 1.5 and 2 per cent for 2026 and around 1.5 per cent for 2027. Its experts name an escalation in the Middle East as the principal global risk, with trade policy and the franc itself next on the list.
For borrowers, exporters and the crowded property market, the message on Thursday is continuity with a warning label. The zero rate survives because inflation lets it survive. If energy keeps pushing prices up while the carry trade keeps pulling the franc down, the discussion inside the SNB’s next assessment, due in December, will be a good deal less comfortable than the one published on Thursday.