🏦🇨🇭Cable FX Macro Weekly Note: SNB Rate Decision

**As seen in Risk In The Week report 09/21/25, get full access now!

Back in June, the SNB cut its key policy rate (sight deposit rate) by 25 basis points to 0%, marking the sixth consecutive rate reduction and bringing it to the zero lower bound. This move was aimed at countering deflationary pressures and supporting economic activity amid a strong Swiss franc and subdued inflation.

The SNB did not rule out further easing, including a potential return to negative interest rates if the outlook deteriorates significantly (e.g., due to a stronger franc or rising energy costs). All options, including foreign exchange interventions, remain on the table, though systematic interventions are unlikely in the near term to avoid perceptions of currency manipulation. Inflation forecasts were revised downward: 0.2% for 2025 (from 0.5%), 0.4% for 2026, and 0.6% for 2027.

Almost all economists (19 out of 21 surveyed by Bloomberg) now predict the SNB will hold rates at 0.00%, a change from earlier expectations of a cut to -0.25%. Only two forecasters still anticipate a 25 basis point reduction. Money markets imply a 60% chance of a hold in September. Most desks note that inflation forecasts remain low (0.2% for 2025, per SNB's June projections), but recent data shows resilience in Q2 GDP growth, reducing urgency for negative rates. Analysts note the SNB's aversion to public backlash against negatives (used 2015–2022) and fears of U.S. perceptions of currency manipulation if paired with interventions. However, the desk at ING is flagging the policy rate falling below 0.0% by year-end. ING noted downward inflation revisions (0.2% in 2025) signal unfinished easing cycle; they see a September hold unless franc weakens sharply or oil spikes.