Monetary policy eased SNB lowers key interest rate to 0.25 percent
The Swiss National Bank (SNB) has lowered its key interest rate once again. The SNB key interest rate is now 0.25 percent, down from 0.50 percent, as the central bank announced on Thursday.
20.03.2025, 09:30
20.03.2025, 10:21
SDA
The Swiss National Bank (SNB) is lowering its key interest rate once again. It justifies this with very low inflation and the uncertain economic outlook.
Specifically, the SNB is lowering the key interest rate by 25 basis points to 0.25 percent, as it announced on Thursday following its quarterly assessment of the situation. This is the fifth interest rate cut in a row.
As a reminder: in March, June and September 2024, the SNB cut the key interest rate by 25 basis points each time, and then by as much as 50 basis points last December. Previously, the central bank had raised the key interest rate from -0.75% in June 2022 to 1.75% in just five steps. The reason for this was the sharp rise in inflation, which has since fallen again significantly.
Stable inflation
According to the SNB, the new key interest rate ensures price stability, i.e. inflation of 0 to a maximum of 2 percent. Inflation is expected to be 0.4% in 2025 and 0.8% in both 2026 and 2027.
Last December, an inflation rate of 0.3 percent was forecast for 2025 and 0.8 percent for 2026, based on a key interest rate of 0.50 percent. The SNB's forecasts are always based on the assumption that the SNB policy rate will remain at the current interest rate level over the entire forecast period.
The main risk in terms of inflation is currently a fall below the 0 percent mark, i.e. deflation. Deflation can be combated with lower interest rates, as low interest rates stimulate the economy and this also has a positive effect on inflation.
Speaking to the media on Thursday, SNB Chairman Martin Schlegel emphasized the "weak inflationary pressure" and "increased downside risks for inflation". Without the interest rate cut that has now been decided, the forecast would be lower in the medium term, he emphasized.
The SNB will now continue to monitor the situation closely, Schlegel continued. And it will adjust its monetary policy if necessary in order to keep inflation within the price stability range. Foreign exchange market interventions remain a possible instrument.
High uncertainty
The SNB is sticking to its previous assessment of economic growth for the current year. It continues to expect growth of between 1 and 1.5 percent. Growth of around 1.5 percent is also forecast for 2026.
According to SNB Director Petra Tschudin, domestic demand should benefit from rising real wages and the easing of monetary policy. On the other hand, the moderate foreign economy will probably have a dampening effect on foreign trade.
The economic outlook for Switzerland has become much more uncertain overall, she emphasized. Against the backdrop of increased global trade and geopolitical uncertainties, developments abroad continue to represent the main risk.
"This is why the outlook for inflation in Switzerland is also very uncertain at the moment," added SNB Chairman Schlegel. "With our interest rate cut, we are taking account of the weak inflationary pressure and the downside risks." At the same time, the SNB is also supporting economic development in Switzerland.
