Swiss National Bank slashes interest rate to 0% as inflation turns negative

The Swiss National Bank (SNB) reduced its key interest rate to 0% on Thursday, citing a decline in inflation, pressure from a stronger Swiss franc, and uncertainty fuelled by US trade policies.

This marked the sixth consecutive rate cut since March 2024, bringing the benchmark down from 0.25%.

The move comes after inflation in Switzerland turned negative in May for the first time in four years, falling outside the SNB’s 0–2% target range.

The SNB said its decision aims to “counter the lower inflationary pressure” observed over the last quarter.

The central bank also acknowledged it may resume negative interest rates — a policy last employed between 2014 and 2022 — if economic conditions worsen further.

SNB Chairman Martin Schlegel noted that negative rates would not be adopted lightly due to their impact on banks, pension funds, and savers.

He added that future policy decisions would depend on developments in the global economy, with the next review expected in September.

Analysts said the move was driven by the franc’s appreciation, which has gained roughly 11% against the U.S. dollar in 2025, lowering the cost of imports and thus inflation.

Economists warned that continued currency strength could undermine exporters and weigh on growth.

The SNB also flagged global economic risks, particularly from rising trade tensions following sweeping U.S. tariffs introduced by President Donald Trump earlier this year.

While the SNB reiterated its readiness to intervene in foreign exchange markets if needed, it also remains wary of being labelled a currency manipulator.

The rate cut places the SNB among several global central banks easing monetary policy amid weakening growth.

Norway’s central bank also made its first rate cut in five years on Thursday, while the European Central Bank lowered rates earlier in June.