Swiss National Bank keeps rate at zero, sees tariff hit to economy

The Swiss National Bank (SNB) held its key interest rate at zero on Thursday, the lowest among major central banks, as it warned that US President Donald Trump's tariffs had dimmed the outlook for the Swiss economy going into 2026.

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The SNB's decision to keep its policy rate at 0 per cent had been widely expected by markets and a Reuters poll, and was helped by a small uptick in inflation in recent months.

It was the first hold in seven meetings by the SNB, after it started reducing borrowing costs in March 2024.

The announcement was the SNB's first rate decision since Trump slapped a 39 per cent tariff on Swiss goods exports to the United States in August.

After the decision, the franc initially strengthened, but later pared those modest gains to trade fairly steadily on the day against the euro, which was last up 0.18 at 0.9345 francs, while the dollar was up 0.13% at 0.796 francs.

The SNB said companies in the machinery and watchmaking sectors are particularly affected by tariffs but that the impact on other industries - notably in services - has been limited.

"The economic outlook for Switzerland has deteriorated due to significantly higher US tariffs. The tariffs are likely to dampen exports and investment especially," it said. Due to the tariffs and the high level of uncertainty, the SNB now expects growth of just under 1 per cent for 2026. In this environment, unemployment is likely to continue rising, it said. It had previously seen growth of between 1 per cent and 1.5 per cent next year.