The Swiss national bank (SNB) meets this week at a time of highly uncertain prospects. Over the past 12 months, inflation has been very low in Switzerland (at most 0.3% year-on-year, with even a dip into negative territory last May), due to the strength of the Swiss franc, which has pushed imported price inflation into negative territory for more than two years, but also to energy prices, which have kept energy inflation deeply negative (in February, energy inflation stood at ‑4.4% year-on-year). In such a context, the SNB has kept its policy rate at 0% since June 2025, while at the same time being very clear that the bar was high for moving its rate back into negative territory. Given the negative side effects, the SNB prefers to avoid this. At its last meeting in December, the SNB’s inflation forecasts pointed to a slight rise in inflation over 2026 and 2027, reaching an average of 0.2% in 2026, 0.6% in 2027 and 0.8% by summer 2028, which allowed it to justify a monetary status quo. The market and the consensus among economists were therefore expecting unchanged rates in 2026, with downside risks.
The war in the Middle East since the end of February has disrupted the situation. On the one hand, due to the increase in risk on global markets, it has led to an appreciation of the Swiss franc, which reached a historic high against the euro at 0.90. As such, this is bad news for the SNB, as it risks pushing imported prices down even further and therefore lowering inflation in Switzerland. In addition, it weighs on the competitiveness of Swiss exporting companies.
But the war in the Middle East also entails an upside risk to inflation, given the rise in energy prices on global markets. The two effects work in opposite directions. As a result, the SNB finds itself facing a highly uncertain situation. We therefore expect a monetary status quo at Thursday’s meeting. The SNB will probably prefer to wait and see which of the two effects will have the greater impact on inflation prospects before acting in one direction or the other.