Swiss National Bank Maintains World’s Lowest Policy Rate at Zero

The Swiss National Bank has left its policy rate unchanged at zero, retaining the lowest policy rate in the world while inflation remains subdued.

The Swiss National Bank (SNB) has left its policy rate unchanged at zero, maintaining the lowest policy rate in the world as inflation remains subdued. Consumer prices rose by 0.8% in August, representing the highest rate in two years but remaining comfortably within the central bank’s definition of price stability, which covers inflation between zero and 2%. The central bank expects inflation to rise to 1.2% in the fourth quarter, largely driven by 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. This position contrasts with that of some other major central banks, as the European Central Bank raised rates earlier this month and America’s Federal Reserve has also increased borrowing costs while signaling that further tightening may follow.

At present, there is little evidence that domestic inflation requires tighter monetary policy, making the SNB’s decision easy to understand. Although Swiss inflation has risen, the increase remains modest, with much of the recent pressure stemming from volatile energy prices. Raising interest 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, having raised its forecast for GDP growth this year to 1.5% to 2%, up from about 1% previously. Growth of around 1.5% is still expected in 2027, supported by demand from abroad, monetary policy, and the depreciation of the Swiss franc. The central bank nevertheless remains prepared to intervene in the foreign-exchange market if necessary, though its wording on this point has shifted slightly to suggest less urgency than before.

The biggest risks to Switzerland’s outlook come from abroad, where a further deterioration in the Middle East could weigh on global activity alongside trade policy and exchange-rate movements. The decision to keep rates on hold was widely expected, as economists surveyed had unanimously forecast no change despite recent rate increases by other major central banks. Low interest rates matter significantly not only to households and businesses but also to governments, and on this measure, Switzerland stands as an extreme outlier.

In 2025, the Swiss government’s gross interest payments amounted to just 0.25% of GDP, the lowest among 35 economies in a comparison by Econorama using OECD Economic Outlook data. Luxembourg followed at 0.33% and Ireland at 0.46%, while America spent the equivalent of 4.72% of GDP on interest, representing a burden nearly 19 times larger than Switzerland’s. Iceland paid 4.27%, Italy 3.86%, Canada 3.35%, Britain 3.28%, France 2.23%, and Germany 1.11%.

This low burden is partly a legacy of Switzerland’s low public debt and partly the consequence of cheap financing. Switzerland’s combination of low debt, low interest costs, and a zero policy rate gives its public finances unusually large room for maneuver. If global borrowing costs remain elevated, that advantage should become increasingly valuable over time.