MNI SNB WATCH: Holds At Zero, But Inflation Outlook Unchanged

The Swiss National Bank left its key policy rate unchanged at 0% on Thursday, in line with expectations. (See MNI SNB WATCH: Rates Seen On Hold At Zero)

In the statement, the SNB said banks' sight deposits will be remunerated at the policy rate up to a certain threshold, while the discount for sight deposits above this threshold still stands at 0.25 percentage points.

Speaking after the decision, SNB President Martin Schlegel said the board would "continue to monitor the situation and adjust our monetary policy if necessary, in order to ensure price stability." However, he offered no forward guidance, saying the board would "look at the data again in December."  While all tools remain at the board's disposal if needed, he reiterated that there is a "high bar" for cutting rates into negative territory.

Addressing franc strength, the SNB said it remains willing to be active in the foreign exchange market as necessary. The board said inflationary pressure was virtually unchanged compared to the previous quarter. 

INFLATION

Inflation increased modestly from the June meeting, rising to 0.2% in August from -0.1% in May, attributable mainly to tourism and imported goods -- though the Board concluded "inflationary pressure has barely changed compared to June." 

"Inflation is likely to be slightly higher in the short term, but in the medium term the conditional inflation forecast remains unchanged,” policymakers said.

According to projections in the policy report, average annual inflation is seen at 0.2% in 2025, 0.5% in 2026 and 0.7% for 2027, all based on the assumption that the SNB policy rate is 0% over the entire forecast horizon.

GLOBAL OUTLOOK

Looking at the baseline scenario, the SNB sees subdued growth in the global economy over coming quarters, with inflation in the U.S. likely to remain elevated for some time and inflation expected to stay close to target across the eurozone. The scenario for the global economy, however, remains subject to high uncertainty.

Economic growth in Switzerland was weak in the second quarter. The outlook has deteriorated and remains uncertain due to significantly higher U.S. tariffs, the SNB said. 

In a first, the SNB will publish minutes of the meeting in four weeks, though analysts remain unsure how much further detail will be added to the policy statement and the post-decision press conference. In the press conference, Schlegel said discussions on how close, or if at all, the SNB was to cutting rates would be in the minutes published on Oct 23.