Zurich (AFP) – Switzerland’s central bank kept its policy rate at zero percent on Thursday, warning that massive US tariffs are weighing on the country’s export-dependent economy. The Swiss National Bank (SNB) maintained its economic growth forecast at between one and 1.5 percent for this year, but revised it to “just under” one percent for 2026 due to the tariffs and uncertainty.
Speaking to reporters after the announcement, central bank chief Martin Schlegel warned that the “the US tariffs present a major challenge for affected companies and are likely to dampen economic activity.” Exports and investment were expected to be impacted, with companies in the machinery and watchmaking industries particularly affected, the SNB said in a statement.
US President Donald Trump shocked Switzerland last month when he announced 39 percent duties on imports of goods from the country, among the highest in his global tariff blitz.
Most analysts had expected the SNB to keep the rate at zero percent, despite rumblings in recent months suggesting the bank might push back into negative territory. Negative interest rates were the cornerstone of SNB’s monetary policy from early 2015 to mid-2022. The goal was to curb the rise of the Swiss franc — a safe-haven currency in turbulent times — and keep the country’s exports competitive.
Asked about a possible return to negative rates, Schlegel said the bank would not “make forward guidance.” “We came to the conclusion that it’s the right decision to leave interest rates at zero percent,” he said. He acknowledged that “uncertainty about inflation and economic developments is still elevated,” adding that the SNB would “continue to monitor the situation and adjust our monetary policy if necessary.”
“We are ready to use all tools at our disposal,” he said, but stressed that “the bar to go into negative territory is higher than for a normal rate cut.” The repercussions of the tariffs for the Swiss economy remain uncertain. Bern is seeking to negotiate a lower tariff with Washington. But Trump has also threatened to target pharmaceutical products from around the world with steep tariffs, which would hit Switzerland hard as the sector is the country’s biggest exporter.
In a market note, Capital Economics analyst Adrian Prettejohn said he expected the SNB to return to negative rates “over the coming quarters.”
© 2024 AFP
