Swiss National Bank’s September monetary policy discussions highlighted how widening international interest-rate differentials and low exchange-rate volatility had increased the attractiveness of Swiss Franc as a “funding currency in carry trades.” Franc depreciated approximately 3% in trade-weighted terms between June and September, reflecting the growing appeal of borrowing in the low-yielding currency. Although Swiss market interest rates increased slightly over the same period, the SNB concluded that currency depreciation more than offset their tightening effect, leaving overall monetary conditions easier. The Governing Board also noted that safe-haven demand for Franc had remained limited.
The SNB nevertheless considered monetary conditions consistent with price stability, despite stronger economic activity and rising inflation. Headline inflation reached 0.8% in August, primarily reflecting higher oil-product prices, while the SNB’s trimmed-mean core inflation measure stood at 0.6%. The Governing Board acknowledged that prolonged elevated energy prices could generate second-round inflation effects, but found little evidence of such pressures emerging. Inflation expectations remained well anchored, while economic growth was robust and broad-based, supporting the SNB’s assessment that medium-term inflation pressures had increased only slightly since June.
Against this backdrop, the Governing Board maintained its policy rate at 0%, judging the prevailing monetary conditions appropriate to ensure price stability over the medium term. The SNB reiterated its willingness to remain active in foreign exchange markets when necessary, but concluded that “An increased willingness to intervene is no longer necessary in the current environment.” The distinction reflects the easing in monetary conditions following Franc depreciation, rather than a withdrawal of the SNB’s broader intervention option. With inflation projected to remain within the range consistent with price stability throughout the forecast horizon, the central bank saw no immediate need to adjust either its policy rate or its heightened intervention stance.
Key Takeaways
- SNB keeps policy rate unchanged at 0%: The September Governing Board assessment concluded that prevailing monetary conditions remained appropriate for medium-term price stability, despite stronger economic activity and higher headline inflation.
- Franc depreciation eases monetary conditions: Swiss Franc weakened approximately 3% in trade-weighted terms between June and September. The SNB judged that the easing effect of currency depreciation outweighed the tightening influence of slightly higher Swiss interest rates.
- Franc becomes more attractive for carry-trade funding: Widening international interest-rate differentials and low exchange-rate volatility increased Franc’s appeal as a funding currency. The SNB also observed limited safe-haven demand during the period.
- Inflation rises, but underlying pressures remain contained: Headline inflation reached 0.8% in August, largely reflecting higher oil-product prices, while the SNB’s trimmed-mean core measure stood at 0.6%. The Governing Board found little evidence of second-round inflation effects, with medium-term expectations remaining well anchored.
- Swiss economic growth remains resilient: Business activity strengthened across manufacturing and services, supporting the SNB’s upgraded 2026 GDP growth forecast of 1.5–2.0%. Growth of approximately 1.5% remains expected for 2027.
- Heightened FX intervention readiness no longer considered necessary: The SNB concluded that “An increased willingness to intervene is no longer necessary in the current environment.” However, it reaffirmed its readiness to remain active in foreign exchange markets when needed to maintain appropriate monetary conditions.
- Policy outlook remains consistent with price stability: Although prolonged elevated energy prices could increase inflation risks, the SNB expects inflation to remain within the range consistent with price stability throughout its forecast horizon. The September discussions provided no indication of an immediate need to adjust the policy rate.
