Swiss rates stay at zero as central bank expects energy inflation to ease

Switzerland’s central bank held its benchmark interest rate at 0% on Thursday, with policymakers expecting energy inflation to ease despite recent increases in fuel costs. CNBC Economy reported that the decision contrasted with rate rises already under way at the European Central Bank, the US Federal Reserve and the Bank of Japan.

Swiss annual inflation reached 0.8% in August, driven upwards by petrol, diesel and heating oil prices. That remained within the Swiss National Bank’s objective of keeping inflation between zero and 2%. Policymakers expect inflation to increase somewhat in the fourth quarter before retreating during 2027 as energy pressures diminish. Their forecasts put average annual inflation at 0.7% in 2026 and 0.8% in both 2027 and 2028.

Switzerland’s energy mix and the composition of its consumer price basket help limit its exposure to higher energy costs. Gedeon Tumong of Switzerland’s HIM Business School told CNBC that energy represents about 3.5% of the Swiss inflation basket, compared with roughly 7% in the euro zone. Hydropower and nuclear generation also offer some protection against regional energy shocks, he said.

The franc provides another buffer by making imports cheaper when it strengthens. However, its recent depreciation has complicated the outlook. SNB Chairman Martin Schlegel told CNBC that policymakers remained willing to intervene in currency markets if needed. He said the bank had prevented a sharp appreciation when safe-haven flows increased following the outbreak of war in Iran in early March, but the currency had since weakened.

Markets nevertheless anticipate tighter policy. According to LSEG data cited by CNBC, traders assign roughly equal odds to a December rate rise or hold, and a probability above 90% to increases beginning by early 2027. UBS economists, who had expected an initial rise in June 2027, said franc weakness, elevated oil prices and resilient US and euro zone economies increased the likelihood of an earlier move. They still considered Swiss inflation unlikely to exceed 2% over the next 12–18 months.