๐จ๐ญ Swiss National Bank Cuts Rate to 0%, Signals Possible Return to Negative Territory
๐ On June 19, 2025, the Swiss National Bank (SNB) officially lowered its policy rate from 0.25% to 0%, effective June 20. This marks the sixth consecutive rate cut since March 2024, bringing the rate down from 1.75% to zero.
๐ฑ Why it matters:
The Swiss franc has appreciated by 11% against the USD so far in 2025, triggering deflationary pressure. Inflation recently dipped to -0.1%, the first negative reading in four years. SNB aims to cool demand for the franc and push inflation back into the 0โ2% target range.
๐ Updated SNB inflation forecasts:
2025: 0.2%
2026: 0.5%
2027: 0.7%
(assuming the rate stays at 0%)
๐ Market reaction:
Swiss stock index dropped 1.1% on the day of the announcement
Banks are under pressure as margins narrow and deposit income vanishes
๐ Is negative interest back on the table?
SNB President Martin Schlegel admitted it remains an option, though not a preferred one. Negative rates, used from late 2014 to 2022, brought major side effects for:
Savers ๐ง
Pension funds ๐
Real estate market ๐๏ธ
๐งญ Still, with deflation risk lingering and potential US tariffs looming, several analysts โ including Bloomberg Economics and Capital Economics โ expect another 0.25% cut in September, possibly pushing rates back below zero.
โ ๏ธ SNB also hinted at possible FX market intervention if needed. This raises concerns that Switzerland may once again be labeled a currency manipulator by the US, as happened on June 6, 2025.
๐ Quick recap:
๐ Announcement date: June 19, 2025
๐ Rate change: 0.25% โ 0%
๐ Latest inflation: -0.1%
๐ Forecast inflation: 0.2% (2025) โ 0.7% (2027)
๐งญ Outlook: Divided views on a further cut in September
โ
๐ง SNBโs move could be an early warning for other developed economies. The battle between deflation, capital flight, and geopolitical pressure is far from over.
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