MNI SNB WATCH: On Hold With Benign Swiss Inflation Outlook

The Swiss National Bank left its benchmark Policy Rate unchanged at 0% as expected on Thursday and said that it has an increased willingness to intervene in the foreign exchange market “if necessary."

While inflation has risen in recent months as a result of higher energy prices, medium-term inflationary pressure "is virtually unchanged compared with the last monetary policy assessment,” it said in a statement.

"Our monetary policy is appropriate to keep inflation within the range consistent with price stability and it supports economic development. We will continue to monitor the situation and adjust our monetary policy if necessary, in order to ensure price stability," SNB President Martin Schlegel said. (See MNI SNB WATCH: On Hold Despite Modest Inflation Upside)

FOREX

Schlegel told reporters that the Board left its statement on forex intervention little changed, repeating its willingness to "counter a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland."

Asked whether the addition of "if necessary" was meant to lessen the impact of the guidance, Schlegel said it should be read exactly as flagged and no inference taken. "We said 'if necessary', and that is exactly how we mean it."

"Upward pressure on the Swiss franc initially increased with the escalation of the conflict in the Middle East, as the franc was sought after as a safe haven and we therefore increased our willingness to intervene in the foreign exchange market at the beginning of March. As the interest rate differentials with other countries have widened, the Swiss franc has depreciated somewhat. However, the geopolitical situation remains uncertain," he said

"The risk of strong upward pressure thus persists. If necessary, we therefore have an increased willingness to intervene in the foreign exchange market," he reiterated.

The Board recognised that "uncertainty about inflation and economic development is still high and [it] will therefore continue to monitor the situation and adjust our monetary policy if necessary, to ensure appropriate monetary conditions."

INFLATION OUTLOOK

Schlegel said the board had discussed the U.S.-Iran memorandum of understanding which was signed on Wednesday.

 "We see inflation to rise over the short term, but think CPI will come down again over the medium term - hence we kept rates unchanged."

"As expected, inflation has risen since the last monetary policy assessment, from 0.1% in February to 0.6% in May. This increase was mainly attributable to higher prices for oil products. The other goods and services made little contribution to the rise in inflation.”

The SNB sees inflation slightly higher in coming quarters, before declining somewhat in the first half of 2027 as the impact of higher energy prices likely eases over time, Schlegel said. The SNB forecast average annual inflation at 0.6% for 2026, 0.6% for 2027 and 0.7% for 2028, based on the assumption that the policy rate is 0% over the entire forecast horizon.

The discount for remuneration on banks’ sight deposits above a threshold was unchanged at 0.25 percentage points.