Swiss National Bank holds rates steady, will not rule out more hikes

ZURICH – The Swiss National Bank kept its policy rate unchanged at 1.75 percent on Thursday after the central bank halted its campaign against inflation, which has recently fallen in Switzerland, but said further tightening cannot be ruled out.

The SNB maintained its policy interest rate and the interest it charges on sight deposits at the same level as in June. This is the first time the central bank has not raised interest rates since March 2022.

The pause contradicted forecasts in a Reuters poll, which had predicted a 25 basis point rise, although money market prices suggested this was seen as a close call. The freeze comes after Swiss inflation stood at 1.6 percent in August, the same level as in July – within the SNB’s target for price increases of 0-2 percent.

Five consecutive rate hikes totaling 250 basis points have helped inflation fall from last year’s peak of 3.5 percent and remain within the central bank’s target range of 0 percent to 2 percent for the past three months.

The SNB deviated from the European Central Bank, which last week raised its key interest rate to a record high of 4 percent, although the US Federal Reserve left its interest rate unchanged on Wednesday.

Sweden’s Riksbank is also expected to raise rates on Thursday, while the Bank of England and the Norwegian central bank also meet on Thursday.

“The significant tightening of monetary policy in recent quarters is neutralizing remaining inflationary pressures,” the Swiss central bank said in a statement.

“From the current perspective, it cannot be excluded that further monetary policy tightening may become necessary to ensure price stability over the medium term,” the report said, adding that it will closely monitor price developments in the coming months.

Tackling resurgent inflation has been the SNB’s main goal in recent months, with the central bank allowing the Swiss franc to appreciate as a way to limit imported price increases.

The SNB maintained its inflation forecast of 2.2 percent for 2023 and 2024, but lowered its outlook for 2025 to 1.9 percent from the 2.1 percent it predicted in June.

The central bank also maintained its expectation for economic growth of around 1 percent this year.

The Swiss government said on Wednesday it expected the country to do so economy will grow by 1.3 percent in 2023 and by 1.2 percent in 2024. Swiss inflation is forecast to reach 2.2 percent this year and 1.9 percent in 2024