Zurich, March 20, 2025 — The Swiss National Bank (SNB) surprised few on Thursday as it lowered its benchmark interest rate by 25 basis points, bringing it down to 0.25%. The move reflects Switzerland’s continued battle with muted inflation, as consumer prices remain well below target levels, posing new challenges for the export-driven economy.

The central bank's latest rate cut, which follows a 50 basis point reduction in December, underscores its commitment to ensuring that monetary policy remains aligned with the country's low inflationary environment and heightened downside risks to price growth.

Key Highlights

• SNB cuts key interest rate by 25 bps to 0.25%
• Swiss inflation dips to 0.3% in February 2025, its lowest in nearly four years
• Inflation expected to average 0.4% in 2025, says SNB
• Swiss franc softens slightly against the euro following the decision
• Move marks SNB's fifth rate cut since March 2024

Why the SNB Is Acting Now: A Preemptive Approach

In its official statement, the Swiss National Bank justified the decision by pointing to persistently low inflation and risks of further downside surprises. “With today’s rate adjustment, the SNB is ensuring that monetary conditions remain appropriate, given the low inflationary pressure and the heightened downside risks to inflation,” the bank said.

Speaking to CNBC’s Carolin Roth, SNB Chairman Martin Schlegel emphasized the importance of early and decisive action in modern monetary policy.

“In today’s environment, if you see a need to act, you have to act early. Waiting adds no value,” Schlegel explained. “Delaying action often forces you to take more drastic measures later.”

This proactive stance comes despite Switzerland maintaining one of the strongest currencies globally, which traditionally acts as a hedge in times of geopolitical instability. However, the Swiss franc edged slightly lower against the euro following the SNB's decision, with the euro gaining 0.06% against the franc in intraday trading.

Inflation Trends: Switzerland Grapples With Price Stagnation

Switzerland’s annual inflation rate slipped to 0.3% in February, the lowest level since 2021, according to the Federal Statistics Office. The decline has largely been attributed to cheaper imports and subdued domestic demand. This follows a broader trend across advanced economies, where inflation has been slowing after a series of aggressive central bank rate hikes between 2022 and 2023.

The SNB noted that its conditional inflation forecast has remained largely unchanged since its last monetary policy review in December 2024.

“Without today’s rate cut, the medium-term inflation outlook would have been lower,” the central bank said.
It now expects inflation to average 0.4% in 2025, comfortably within its price stability range of 0% to 2%.

A History of Cuts: Switzerland Leads Global Monetary Easing

The latest move continues a monetary easing cycle that began in March 2024, when the SNB became the first major central bank to lower interest rates as global inflationary pressures receded.
Since then, the SNB has delivered a total of five rate reductions, including the surprise 50 basis point cut in December, which exceeded market expectations at the time.

Prior to Thursday's decision, traders had already priced in a 70% probability of a quarter-point cut, according to Bloomberg data, as Swiss economic indicators continued to signal weak price pressures and modest growth prospects.

Swiss Franc: Still a Safe Haven but Easing Modestly

Despite rate cuts, the Swiss franc has remained relatively resilient, bolstered by its safe-haven status during times of geopolitical and economic turmoil, particularly in the Eurozone.
Following the SNB’s announcement, the franc experienced a mild dip but continued to trade near multi-year highs against many global currencies.

Currency traders and analysts have flagged the exchange rate as a critical factor for Switzerland, given the country's dependence on exports.
SNB Chairman Schlegel acknowledged this dynamic, stating:

“Switzerland is a small, open economy, and a large share of our GDP comes from exports. Open borders and free trade are essential, which makes the exchange rate a key concern for us.”

Global Trade Risks: Tariffs and Swiss Export Concerns

Schlegel also touched on global trade tensions, highlighting the potential impact of U.S. tariffs under President Donald Trump’s policies on Swiss exporters.

“Switzerland thrives on open markets. Protectionist measures are always a concern for an export-driven economy like ours,” Schlegel added.
Key Swiss export sectors—such as pharmaceuticals, precision instruments, and luxury goods—rely heavily on stable trade relationships with Europe, the U.S., and Asia.

Looking Ahead: Will More Cuts Follow?

The SNB left the door open for further monetary policy adjustments, depending on how the inflation outlook evolves.

“We will continue to closely monitor economic and inflation developments and act as needed to maintain price stability,” the SNB reiterated in its statement.

For now, markets are pricing in the possibility of another rate cut in the second half of 2025, particularly if Swiss inflation shows signs of further deceleration or if global economic conditions deteriorate.

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Conclusion: Swift Action Aims to Secure Switzerland’s Economic Stability

The Swiss National Bank’s latest rate cut underscores its proactive approach in addressing low inflation and external risks. As Switzerland navigates sluggish price growth, currency pressures, and global trade headwinds, the SNB’s actions signal a clear intent to stay ahead of the curve.

Whether this strategy delivers the desired economic stability remains to be seen, but for now, Switzerland is leading the pack among advanced economies easing monetary policy in 2025.

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