The Swiss National Bank Cuts Policy Interest Rate to 0% from June 20, 2025, the Sixth Consecutive Reduction Since March 2024.
The Swiss National Bank (SNB) has cut its policy interest rate to 0% on June 19, 2025, officially restoring the Zero Interest Rate Policy (ZIRP) with immediate effect. This decision marks Switzerland's return to the "0% interest rate club" to combat prolonged deflationary pressures.
SNB reduced 0.25 percentage points, bringing the policy interest rate from 0.25% to 0%, effective from June 20, 2025. This decision marks the sixth consecutive interest rate cut since March 2024, bringing the rate from a peak of 1.75% to zero, returning to the policy applied during the 2010s.
The main reason cited by SNB is prolonged deflationary pressure and the strong appreciation of the Swiss franc. Specifically, the CPI in May 2025 decreased by 0.1%, primarily due to lower travel and fuel prices. The Swiss franc has increased by over 10% against the USD since the beginning of the year, being considered a safe-haven asset amid global uncertainty.
The strong currency has led to lower import prices, exacerbating the deflationary trend. SNB stated that this move aims to stimulate inflation back to the stable target, with inflation forecasts averaging 0.2% in 2025, 0.5% in 2026, and 0.7% in 2027.
Multifaceted Impact on Domestic Economy
In the domestic market, this move aims to lower borrowing costs to support consumption and investment, while weakening the franc to improve competitiveness for export businesses. However, savers will suffer due to near-zero interest rates, while banks will face narrowed credit profit margins, creating difficulties for traditional business operations.
Some analysts suggest that SNB might go further, pushing rates into negative territory if deflationary pressures continue. The SNB's move is being closely watched by the international market, as it could become a precedent for other central banks if global economic conditions worsen.
Historically, low interest rates have contributed to increased demand for risky assets, including stocks and digital assets. The crypto market typically benefits from low-interest environments when investors seek higher yields from non-traditional channels.
SNB affirms continued close monitoring of economic conditions and stands ready to intervene in foreign exchange markets to stabilize the franc's value if necessary. Switzerland's GDP growth is forecast to reach only 1% – 1.5% in 2025 and 2026, reflecting prolonged economic stagnation.
