Swiss National Bank Holds Rate at 0% as Inflation Stays at 0.8%

The Swiss National Bank left its key interest rate unchanged at 0% on Thursday, resisting the tightening cycle already under way at most of its major trading partners. But traders say a hike is only a matter of time.

Switzerland's annual inflation rate stood at 0.8% in August, up slightly on rising gasoline, diesel and heating oil costs. That is still comfortably inside the SNB's 0% to 2% objective, and far below levels in the United States, the United Kingdom and the euro zone.

Diverging from major peers

Thursday's decision puts the SNB out of step with the European Central Bank, the U.S. Federal Reserve and the Bank of Japan, which have all started raising rates to fight inflation. The central banks of Canada and the UK, also major Swiss trading partners, are expected to follow later this year.

Those peers target 2% inflation. The SNB's mandate is looser, aiming to keep price growth between 0% and 2%, which gives it more room to stay put.

Markets price the next move

Traders are pricing odds of a hike versus a hold at close to 50-50 for December. The market puts the chance of the SNB starting its hiking cycle by early 2027 at more than 90%.

Data from LSEG shows traders betting the SNB's key rate will rise to at least 0.75% by next September.

Three factors have helped Switzerland contain price pressures: the strength of the franc, low inflation expectations and the country's energy mix. The franc's safe-haven status means it tends to appreciate in uncertain times, and a stronger currency makes imports cheaper. Imports play a significant role in the Swiss economy, so that strength feeds directly into lower prices and puts deflationary pressure on the country.

Recent weakness in the franc, however, could strengthen the case for an earlier hike.

What it means

Switzerland is not Nigeria, and the SNB's zero-rate stance says more about the franc's safe-haven pull than about global policy direction. Still, the divergence matters. If the SNB eventually lifts rates while the ECB, Fed and Bank of Japan are already tightening, the franc could firm again on rate differentials and safe-haven demand.

For Nigerian businesses that import machinery, pharmaceuticals or precision goods from Switzerland, a stronger franc raises the naira cost of those orders. A weaker franc would do the opposite. The December meeting is the next date to watch.