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SNB Maintains Policy Rate at 0% Amid Rising Inflation and Global Uncertainty

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SNB Maintains Policy Rate at 0% Amid Rising Inflation and Global Uncertainty

The Swiss National Bank (SNB) has released its latest monetary policy assessment, announcing that it will maintain the SNB policy rate at 0%. This decision comes as the bank continues to navigate a complex global economic environment marked by rising inflation and heightened uncertainty.

Policy Rate Decision

The SNB has decided to leave the SNB policy rate unchanged at 0%. Banks' sight deposits held at the SNB will continue to be remunerated at the SNB policy rate up to a certain threshold, with a discount of 0.25 percentage points applied to sight deposits above this threshold. The SNB has also reiterated its willingness to intervene in the foreign exchange market if necessary to counter a rapid and excessive appreciation of the Swiss franc.

Economic Assessment

The SNB has observed a rise in inflation in recent months, driven primarily by higher energy prices. Inflation increased from 0.1% in February to 0.6% in May. The SNB's conditional inflation forecast suggests that inflation will continue to rise slightly in the coming quarters before declining again in the first half of 2027. The forecast puts average annual inflation at 0.6% for 2026, 0.6% for 2027, and 0.7% for 2028. The SNB notes that economic activity in Switzerland has been resilient, with solid GDP growth in the first quarter. Unemployment has risen somewhat since the last monetary policy assessment. The SNB expects growth of around 1% for 2026 as a whole and around 1.5% for 2027.

CHF and Market Implications

The SNB's decision to maintain its policy rate at 0% and its willingness to intervene in the foreign exchange market may impact the value of the Swiss franc (CHF). The SNB's statement suggests that it is prepared to counter any rapid and excessive appreciation of the CHF, which could have implications for the currency's value against other major currencies. The SNB's actions may also influence Swiss government bonds and the SMI index, although the exact impact will depend on various market factors.

Forward Guidance

The SNB has indicated that it will continue to monitor the situation and adjust its monetary policy if necessary to ensure price stability. The bank's conditional inflation forecast is based on the assumption that the SNB policy rate will remain at 0% over the entire forecast horizon. The SNB is watching key data, including inflation rates, GDP growth, and global economic developments, particularly in the Middle East. The next quarterly assessment is expected to provide further guidance on the SNB's policy path. The SNB has highlighted that the main risk to the economic outlook for Switzerland is developments in the global economy, particularly the situation in the Middle East and US trade policy.

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