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Switzerland’s central bank (SNB) decided to lower its key interest rate to zero on Thursday as inflationary pressures have eased.
The Swiss National Bank says its policy rate would drop to zero from 0.25%, after noting that nearly flat inflation nosed into negative territory in May.
Consumer prices fell by an annual 0.1% in May.
Many Western economic powers have been grappling with monetary policy at a time when price rises have eased in many places, but political instability and US tariffs are muddying economic predictions.
The SNB attributed the drop in inflation in Switzerland primarily to declining prices in the tourism and oil sectors.
It’s now projecting annual inflation at 0.2% this year, before edging up to a half-point next year and 0.7% in 2027. That’s based on a scenario that its target interest rate will remain at zero over that span.
“In its baseline scenario, the SNB anticipates that growth in the global economy will weaken over the coming quarters,” it said in a statement. “Inflation in the US is likely to rise over the coming quarters. In Europe, by contrast, a further decrease in inflationary pressure is to be expected.”
Switzerland enjoyed “strong” economic growth in the first quarter, the bank said, largely because exports to the United States were brought forward as companies sought to anticipate future US tariffs that could raise the price of foreign goods for American consumers.
The US Federal Reserve kept its key rate unchanged Wednesday as it waits for additional information on how tariffs and other potential disruptions will affect the economy this year. US President Donald Trump has pressed the Fed to lower interest rates, hoping it will boost the US economy.