U.S. Tariffs Challenge Swiss Economic Outlook as SNB Holds Rates Steady

The Swiss National Bank (SNB) announced on Thursday that it would keep its key interest rate at zero, maintaining the lowest level among major central banks. The decision, which aligns with market expectations, comes amid economic uncertainty driven by U.S. President Donald Trump's tariffs that have clouded Switzerland's economic outlook through 2026.

This marks the first time in seven meetings that the SNB has held rates steady, following a series of rate cuts beginning in March 2024. The move follows the imposition of a 39% tariff on Swiss exports to the U.S. in August, which significantly impacts Switzerland's machinery and watchmaking sectors, though other sectors have seen limited effects.

The SNB's forecast now indicates slowed growth of just under 1% for 2026, with rising unemployment anticipated. Despite recent inflation aligning within the 0-2% target range, some economists predict continued rate cuts to address low inflation and the risk of deflation, especially after the U.S. Federal Reserve's recent rate reduction.