🇨🇭 Swiss National Bank Cuts Rate to 0%, Signals Possible Return to Negative Territory

📆 On June 19, 2025, the Swiss National Bank (SNB) officially lowered its policy rate from 0.25% to 0%, effective June 20. This marks the sixth consecutive rate cut since March 2024, bringing the rate down from 1.75% to zero.

💱 Why it matters:
The Swiss franc has appreciated by 11% against the USD so far in 2025, triggering deflationary pressure. Inflation recently dipped to -0.1%, the first negative reading in four years. SNB aims to cool demand for the franc and push inflation back into the 0–2% target range.

📊 Updated SNB inflation forecasts:

2025: 0.2%

2026: 0.5%

2027: 0.7%
(assuming the rate stays at 0%)

📉 Market reaction:

Swiss stock index dropped 1.1% on the day of the announcement

Banks are under pressure as margins narrow and deposit income vanishes

📌 Is negative interest back on the table?
SNB President Martin Schlegel admitted it remains an option, though not a preferred one. Negative rates, used from late 2014 to 2022, brought major side effects for:

Savers 🧓

Pension funds 📉

Real estate market 🏘️

🧭 Still, with deflation risk lingering and potential US tariffs looming, several analysts — including Bloomberg Economics and Capital Economics — expect another 0.25% cut in September, possibly pushing rates back below zero.

⚠️ SNB also hinted at possible FX market intervention if needed. This raises concerns that Switzerland may once again be labeled a currency manipulator by the US, as happened on June 6, 2025.

🔍 Quick recap:

🗓 Announcement date: June 19, 2025

📉 Rate change: 0.25% → 0%

📊 Latest inflation: -0.1%

📈 Forecast inflation: 0.2% (2025) → 0.7% (2027)

🧭 Outlook: Divided views on a further cut in September

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🧠 SNB’s move could be an early warning for other developed economies. The battle between deflation, capital flight, and geopolitical pressure is far from over.

#SNB #InterestRates #SwissEconomy2025