The Swiss National Bank (SNB) is anticipated to reduce its benchmark interest rate by 25 basis points to 0.25% at its upcoming meeting on March 20. A majority of economists forecast that the central bank will maintain this lower rate until at least 2026, following a 50-basis-point cut in December.
Inflation in Switzerland remains low, at 0.3% in February, well within the SNB’s target range of 0-2%. This cooling of price pressures may allow for additional monetary easing, though concerns about the strong Swiss franc’s impact on exporters persist, particularly in watchmaking.
Monetary Policy Considerations
While a 25-basis-point cut is expected, some analysts suggest caution due to resilient Swiss economic growth and uncertainties in global trade. Factors such as potential tariffs and evolving eurozone dynamics could further complicate the SNB’s decision-making.
Markets are also anticipating further easing from the European Central Bank later this year. Investors will be particularly attentive to the SNB’s policy statement for any indications regarding future rate cuts or currency interventions.
A reduction in Switzerland’s benchmark interest rate from 0.5% to 0.25% now appears highly likely. The central bank’s last decision in December set the stage for a continued easing cycle, and persistent weak inflation supports this trajectory. With consumer prices rising just 0.3% year-on-year in February, well below levels seen in other advanced economies, the case for monetary loosening grows stronger. At present, inflation remains safely within the tolerated range of 0-2%, reducing the need for tighter policy.
The impact of a stronger currency remains a concern, especially for sectors reliant on foreign demand. Swiss exports—particularly those tied to high-value goods like luxury watches—face ongoing headwinds if the franc stays firm against the euro and the dollar. Despite this, economic resilience complicates the argument for aggressive interest rate reductions. Domestic growth has remained steady, and global supply chain pressures may resurface if trade frictions escalate. In such a scenario, holding rates steady for longer might be justified.
European Central Bank Influence
Attention is also turning to the European Central Bank, as expectations build for policy adjustments later in the year. Any shift by policymakers in Frankfurt could feed into currency market fluctuations, which may prompt a response in Switzerland. Investors will focus on what officials communicate beyond the upcoming rate decision—any reference to intervention in foreign exchange markets, or conditions under which further cuts would occur, could shape expectations well beyond March.
