ZURICH. The Swiss National Bank expects to keep its policy rate at zero until the end of 2027 and to begin raising it only after that, according to people familiar with thinking inside the institution. The view rests on the bank's current inflation forecasts and assumes no fresh shock to the world economy.
The people, who asked not to be named because the deliberations are private, said the outlook is also shaped by the franc's weakening against the euro since March and by the interest rate gap between Switzerland and the currency bloc. A softer franc loosens monetary conditions on its own, doing part of the work a rate cut might once have done.
Negative interest rates remain available should a new jolt hit the outlook, the people said, though that is not the base case. They added that borrowing costs at zero are not inflicting severe damage on the profitability of Swiss banks, the complaint that eventually forced the end of the sub zero era in 2022.
The franc slipped after the report, erasing earlier gains to trade 0.1 per cent lower against the euro at 0.9311. It has now given up roughly 3.4 per cent against both the euro and the dollar since March, a marked turn for a currency that spent the first quarter bid higher on safe haven flows.
The central bank held its rate at zero in June, a fourth consecutive pause, and officials have been unusually candid about why they are comfortable. Petra Tschudin, a member of the governing board, said last week that the franc's weakness primarily reflects higher interest rate expectations abroad, which widen the yield gap against Swiss assets.
The board remains ready to intervene in currency markets to smooth sharp moves in either direction, the people said, but not to defend any particular level of the franc. The particular concern, restated this month, is a rapid and excessive appreciation that could drag inflation below the floor of the target range.
Swiss inflation slowed to 0.5 per cent last month after a brief rise linked to the war in the Middle East. The SNB expects it to peak at 0.8 per cent, comfortably inside the zero to 2 per cent band the bank equates with price stability. Data for July, due next week, are not expected to change the picture.
Economists surveyed this month mostly expect the first rate rise in March 2028, although almost a third anticipate an earlier move. Currency traders are more hawkish, betting on an increase by March next year at the latest and pricing roughly a coin flip chance of one at the December meeting. The bank's own horizon is longer than either.
The people cautioned that the path is a forecast, not a promise, and that the SNB does not commit itself to dates. A recession in the euro area, an energy shock or an abrupt move in the franc could all force a rethink, in either direction.
For exporters in the machine, precision instrument and watch industries, the message is close to ideal: no tightening for at least sixteen months, and a central bank unruffled by a cheaper franc. For savers, it is another year and a half of deposit rates hugging zero.
The next scheduled monetary policy assessment is in September. Nobody in Zurich expects it to produce anything but a hold, and the people familiar with the bank's thinking did nothing to discourage that expectation.