Zero Percent: Switzerland Reverts to 0% Rates to Counter Deflation Pressure

The Swiss National Bank (SNB) cut its key interest rate to 0% on June 19, 2025, reinstating a zero interest rate policy (ZIRP) effective immediately.

SNB Joins Zero-Rate Club After Sixth Consecutive Cut

The Swiss National Bank (SNB) lowered its policy rate by 0.25 percentage points to 0%, effective June 20, 2025. This decision marks a return to the zero interest rate policy (ZIRP) previously used in the 2010s. It represents the SNB’s sixth consecutive rate reduction since March 2024, bringing the rate down from 1.75%.

The central bank cited persistent deflationary pressures and the strength of the Swiss franc as key reasons. Consumer prices fell 0.1% in May 2025, driven partly by lower prices in tourism and oil products. The franc has appreciated more than 10% against the U.S. dollar this year, acting as a safe haven amid global uncertainties.

This appreciation pushed down import prices, worsening deflation. The SNB aims to stimulate inflation towards its stability goal, forecasting average annual inflation of 0.2% for 2025, 0.5% for 2026, and 0.7% for 2027 under the new rate.

Domestically, the move aims to make borrowing cheaper, encourage investment, and weaken the franc to aid Swiss exporters. However, it poses challenges for savers due to negligible returns and for banks facing compressed lending margins. Some analysts speculate further cuts into negative territory could follow.

Globally, the SNB’s action is seen as a potential signal for other advanced economies to revisit ZIRP if conditions worsen. Historically, low rates have boosted demand for riskier assets, including equities. Cryptocurrency markets also often see increased interest in such environments as investors search for yield.

The SNB stated it will continue monitoring economic conditions and remains prepared to intervene in foreign exchange markets to manage the franc’s value. Subdued Swiss GDP growth of 1% to 1.5% is expected for both 2025 and 2026.