The Swiss National Bank (SNB) has left its policy rate unchanged at zero, the lowest policy rate in the world.
Inflation remains subdued. Consumer prices rose by 0.8% in August, the highest rate in two years but still comfortably within the SNB’s definition of price stability, which covers inflation of between zero and 2%.
The central bank expects inflation to rise to 1.2% in the fourth quarter, largely because of higher oil prices, before easing again during 2027. Its latest forecast puts average annual inflation at between 0.7% and 0.8% in 2026, 2027 and 2028, before edging up to as much as 0.9% in 2029.
The SNB therefore argues that its current monetary stance is consistent with price stability while supporting the economy.
Its position contrasts with that of some other big central banks. The European Central Bank raised rates earlier this month, while America’s Federal Reserve has also increased borrowing costs and signalled that further tightening may follow.
Little reason to tighten
The SNB’s decision is easy to understand. At present there is little evidence that domestic inflation requires tighter monetary policy.
Although Swiss inflation has risen, the increase remains modest. Much of the recent pressure has come from volatile energy prices. Raising rates simply because petrol, diesel and heating oil have become more expensive would risk weakening the economy without doing much to address the source of inflation.
The SNB expects the economy to grow moderately over the coming quarters. It has raised its forecast for GDP growth this year to 1.5-2%, from about 1% previously. Growth of around 1.5% is still expected in 2027.
Demand from abroad should continue to support the economy, the bank said. Monetary policy and the depreciation of the Swiss franc should also provide some stimulus.
The SNB nevertheless remains prepared to intervene in the foreign-exchange market if necessary. Its wording on this point has shifted slightly from its previous assessment, suggesting less urgency than before.
The biggest risks to Switzerland’s outlook come from abroad. A further deterioration in the Middle East could weigh on global activity. Trade policy and exchange-rate movements are additional sources of uncertainty.
No surprise
The decision to keep rates on hold was widely expected. Economists surveyed by the AWP news agency had unanimously forecast no change, despite recent rate increases by other major central banks.
Switzerland’s advantage
Low interest rates matter not only to households and businesses but also to governments. On this measure Switzerland is an extreme outlier.
In 2025 the Swiss government’s gross interest payments amounted to just 0.25% of GDP, the lowest of the 35 economies in a comparison by Econorama. Luxembourg was next, at 0.33%, followed by Ireland at 0.46%. The figures are based on OECD Economic Outlook data.
At the other end of the table, America spent the equivalent of 4.72% of GDP on interest—almost 19 times Switzerland’s burden. Iceland paid 4.27% and Italy 3.86%. Canada and Britain spent 3.35% and 3.28% respectively. France’s bill was 2.23% of GDP, while Germany paid 1.11%.
This is partly a legacy of Switzerland’s low public debt and partly the consequence of cheap financing. Interest costs reflect both the size of a government’s liabilities and the rates it pays on them. Econorama’s measure covers gross interest payments by central, regional and local government, as well as social-security funds; it does not subtract interest income earned on government assets.
The distinction matters because interest costs can compound fiscal differences over time. Governments with heavy debts must devote an increasing share of revenue to servicing past borrowing as old debt is refinanced at higher rates. Without additional borrowingm, money spent on interest diverts money from infrastructure, defence, pensions or tax cuts.
Switzerland’s combination of low debt, low interest costs and a zero policy rate gives its public finances unusually large room for manoeuvre. If global borrowing costs remain elevated, that advantage should become more, not less, valuable.
America illustrates the arithmetic. If Washington were to continue adding debt at the same pace as its latest fiscal shortfall—about $1.78trn against a debt stock of roughly $40trn—the debt would growby about 4.45% a year. If that rate persisted and compounded, the debt stock would double in roughly 16 years. This is of course a simplistic illustration rather than a forecast. The government debt path also depends on economic growth, inflation, refinancing costs, tax revenues and the maturity structure of outstanding bonds. But the arithmetic captures the underlying problem. When a government is adding substantial new borrowing to an already large debt stock while also paying interest on that stock, the two forces can accelerate the growth of its debt pile.
Switzerland’s small debt burden and exceptionally low interest bill mean that comparatively little national income is consumed by the cost of past borrowing, leaving more fiscal capacity to invest and to respond to any economic shocks.
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