Tension had been rising in recent weeks. Would the Swiss National Bank (SNB) lower its key interest rate by another quarter percentage point? Or would it keep the rate steady at 0,5 percent?

For reference: In December 2024, the SNB had cut the key interest rate as expected by the market, but with a half-percentage-point reduction, it made a larger move than many had anticipated. After that, most observers expected another small rate cut to follow in March.

However, in light of the fiscal policy shift in Germany, which includes massive planned additional spending on defense and infrastructure and has contributed to a slight depreciation trend of the Swiss franc against the euro, voices emerged predicting that the SNB would hold off.

Among them was Martina Honegger-Romahn, Lead Portfolio Manager Fixed Income Switzerland at Allianz GI. While she expected rates to remain unchanged, she was aware that this put her in the minority compared to market expectations and acknowledged that there were also strong arguments in favor of a rate cut. Alexander Koch, an economist at Raiffeisen, also joined this camp, noting that a pause in SNB rate cuts had become more likely.

Even economists who anticipated another rate cut had become more cautious. UBS analysts, for example, described the outcome of the monetary policy assessment as a «coin toss» given the recent developments.

Now, according to a communiqué released on Thursday morning, the SNB has decided on another easing measure. With today’s rate adjustment, the National Bank ensures that monetary conditions remain appropriate given the weak inflationary pressure and heightened downside risks to inflation. The inflation forecast remains practically unchanged.

More to follow.