Swiss National Bank continued to lower interest rates in March, while highlighting that external geopolitical risks could still be a threat to the Swiss economy and exports.
The Swiss National Bank (SNB) slashed its benchmark interest rate by 25 basis points to 0.25% on Thursday. The cut was in line with market expectations, amid ongoing economic uncertainty and low inflation. It also marks the first time the bank has lowered its rate since a surprise 50-basis-point cut in December last year.
Swiss inflation fell from 0.7% year-on-year in November 2024 to 0.3% in February this year, primarily because of dropping electricity prices. This was despite higher domestic services prices which somewhat offset the decrease.
The SNB predicts that inflation will touch around 0.4% this year, before averaging approximately 0.8% both next year and in 2027. That’s based on the assumption that the policy rate remains at 0.25%.
The central bank said in a press release: “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 SNB will continue to monitor the situation closely and adjust its monetary policy if necessary, to ensure that inflation remains within the range consistent with price stability over the medium term.”
Swiss stocks were upbeat on Thursday morning, with healthcare giant Roche up 0.2% on the SIX Swiss Exchange, and Nestlé also rising 0.5% on the same exchange. Pharmaceutical giant Novartis also advanced 0.6% on the SIX Swiss Exchange on Thursday morning.
Swiss growth likely to slow in 2025
Switzerland’s State Secretariat for Economic Affairs (SECO) recently slashed its growth outlook for the Swiss economy.
SECO said in a press release this week: “The Federal Government Expert Group on Business Cycles has slightly lowered its growth forecast for the Swiss economy. In 2025, GDP adjusted for sporting events is expected to grow by 1.4%, followed by 1.6% in 2026 (December forecasts: 1.5% and 1.7% respectively).”
“This would mean the Swiss economy would continue to grow below its historical average for another two years.”
The Swiss economy’s historical average growth has been 1.8%.
The updated forecast from SECO is based on the assumption that there will be no escalating global trade war, although the body acknowledged that “uncertainty surrounding international economic and trade policy and their macroeconomic consequences remains exceptionally high”.
Experts noted that in a more negative trade situation, in which global economic activity decreases more, Swiss domestic growth and exports are likely to be considerably impacted. On the other hand, a more positive economic situation, boosted by Germany’s newly-approved large fiscal package, would go a long way in supporting the Swiss economy and exports.
Global consultancy firm Roland Berger also expects a sport-event adjusted growth rate of 1.4% for the Swiss economy in 2025.
“Propelled by easing inflation and lower interest rates, consumer spending is set to rise and investment is expected to rebound in 2025. However, mounting geopolitical uncertainty and a shift towards protectionism are likely to bolster the Swiss franc further – a development that could dampen export growth,” the company said.
Roland Berger also pointed out that Swiss economic growth was still likely to be ahead of the eurozone average, especially as major economies such as Germany and France are expected to continue to lag this year.
