Swiss National Bank Keeps Rates at Zero, Eyes Middle East Conflict

Swiss National Bank holds rates amid Iran conflict, watches franc strength

Swiss National Bank Policy Decision and Market Impact

By John Revill

ZURICH, March 19 (Reuters) - The Swiss National Bank kept its policy rate on hold on Thursday in the face of uncertainty over the Iran war, and signalled readiness to intervene to curb a recent surge in the Swiss franc fuelled by a flight to safety amid the global turmoil.

The SNB maintained its benchmark interest rate at 0%, the lowest among major central banks, as expected by a wide majority of analysts polled by Reuters.

The decision came on a busy day for central banks, after the U.S. Federal Reserve on Wednesday kept rates unchanged, highlighting unusually high uncertainty as policymakers take stock of the impact of the U.S. and Israeli war with Iran.

SNB's Stance on Currency Intervention

Readiness to Counter Franc Appreciation

READY TO INTERVENE TO COUNTER FRANC RISE

"Given the conflict in the Middle East, the SNB's willingness to intervene in the foreign exchange market has increased," the central bank said in a statement.

"The SNB thereby counters a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland," it said.

The franc weakened briefly after the decision, but soon recovered to trade a touch higher against the euro and dollar, at 0.9082 francs and 0.793 francs, respectively.

Analyst Reactions and Global Context

"It wasn't a surprise the SNB didn't change its interest rate as it is waiting to get more evidence of the impact of the economic shock of the Middle East conflict before deciding what to do," said GianLuigi Mandruzzato, an economist at EFG Bank.

Sweden's central bank also held rates on Thursday and the European Central Bank and the Bank of England are expected to do the same later in the day.

Swiss Franc Performance and SNB Actions

Franc as a Safe Haven

The franc has remained near 11-year highs against the euro in recent days, as inflows intensified by the U.S.-Israeli strikes on Iran pushed up the currency, which acts as a safe haven at times of global turbulence.

The franc gained 14% against the dollar in 2025 and continued to rise this year, while it is up nearly 2.5% against the euro so far in 2026.

Verbal and Actual Interventions

The SNB earlier this month responded with a rare verbal intervention, saying its willingness to intervene in the foreign currency markets had increased.

Karsten Junius, chief economist and head of economic and strategy research at J. Safra Sarasin, said he believed the SNB has already been intervening in the past weeks.

Focus on Export Sector

"The economic problems are centred in the export sector. FX-interventions are the best targeted measure to prevent further damage from the export sector which is why they should be the policy tool of choice now," Junius said.

The SNB stepped up foreign currency purchases last year amid trade turmoil fed by U.S. tariffs, but SNB Chairman Martin Schlegel declined to be drawn on how far it would go this year.

Marked appreciation in the franc makes imports cheaper, threatening to push inflation below the SNB's target range of 0 to 2%, while also making Swiss exports less competitive.

Interest Rate Outlook and Economic Forecasts

Inflation and Rate Expectations

ZERO RATES SEEN THROUGHOUT 2026

Swiss annual inflation was just 0.1% in February and January, but Schlegel has said even a short period of negative inflation would not be a matter of concern.

At the same time, such low readings give the SNB some leeway to hold off on hiking rates to counter price pressures from surging energy costs, especially given that petroleum products have a low weighting in Switzerland's consumer price basket.

Updated Economic Projections

The SNB also updated its economic forecasts, saying it expected Swiss inflation to be 0.5% in 2026, up from its 0.3% previous prediction. It maintained its forecast that Swiss economic growth would be around 1% this year.

"The SNB's message is essentially: keep calm and carry on. I expect the bank to look through the temporary, energy-driven rise in inflation linked to the Iran conflict and to keep the policy rate at 0% for the rest of the year," said Brian Mandt, chief economist at Luzerner Kantonalbank.

(Reporting by John RevillAdditional reporting by Ariane Luthi, Miranda Murray, Friederike Heine, Ludwig Burger, Madeline Chambers and Thomas SeythalEditing by Dave Graham and Tomasz Janowski)