Nomura economists expect the SNB to maintain its key interest rate at 0.00% on March 19 and for the foreseeable future. They see low but positive inflation in Switzerland, stable GDP growth and rising global energy prices, but highlight the appreciation of the Swiss franc as the main downside risk to inflation and the impetus for potential currency intervention rather than interest rate cuts.

The strength of the franc and the risk of energy-induced inflation

“We expect the SNB to leave its key interest rate unchanged at 0.00% at its meeting on March 19. While CPI inflation is low (over the past three months at 0.1% year-on-year), it remains within the SNB’s target range of 0-2%, printed in line with the SNB’s latest 2026 forecast, and policymakers are likely to expect it to increase.

“A key concern for the SNB will be the CHF appreciation pressure resulting from the current risk environment, which may encourage the central bank to intervene in foreign exchange. The SNB has stated in a statement since the beginning of the conflict that “in light of developments in the international arena, we are increasingly prepared to intervene in the foreign exchange market.”

“We therefore believe that currency intervention to contain currency appreciation pressures and their inflationary effects is more likely than a reduction in interest rates to a negative rate.”

“Indeed, Chairman Schlegel has commented on several occasions that the bar is high for cutting the key interest rate below zero, and in February he stated that negative inflation readings would not trigger immediate alarm, suggesting that the SNB is more willing to tolerate modest deflation than a negative interest rate.”

“Going forward, our central forecast is for the SNB key interest rate to remain at 0.00% for the foreseeable future as we believe inflation will accelerate.”

(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor.)