Share This News

In a surprising move, the Swiss National Bank (SNB) has cut interest rates again — this time by 25 basis points, bringing the rate down to 0%. This decision was made on Thursday and has led to new discussions about the possibility of negative interest rates returning to the country. This is one of the most important Daily news highlights in global financial news.

Why Did Switzerland Cut Rates?

The SNB said in its official statement that inflation in Switzerland has gone down, especially compared to the last quarter. The central bank explained that the rate cut is meant to keep inflation low and stable.

“Inflationary pressure has decreased… With today’s easing, we are responding to that,” the SNB noted.

Unlike many countries around the world that are still fighting high inflation, Switzerland is dealing with deflation. In May, consumer prices in Switzerland actually fell by 0.1% compared to the previous year.

Switzerland’s Unique Economic Situation

Switzerland has experienced low inflation or deflation several times before — especially during the 2010s and early 2020s. One of the main reasons is the strong Swiss franc, which is known as a safe-haven currency. That means during global financial troubles, investors put their money into Swiss francs, which makes the currency stronger.

According to Charlotte de Montpellier, a senior economist at ING, when the franc gets stronger, the price of imported goods goes down. Since Switzerland is a small country that imports many products, this has a big effect on its overall inflation.

“Switzerland’s strong franc keeps prices low. A lot of what they buy is from abroad,” she explained.

How a Strong Franc Affects the Economy

The franc has been getting stronger over the last few months, mainly due to global uncertainty and economic troubles in other parts of the world. This has made it harder for the SNB to keep inflation at its target level.

To slow down the franc’s rise, the SNB is now trying to keep interest rates lower than in other countries. This makes the Swiss franc less attractive to international investors, which could help balance things out.

After the rate cut announcement, the franc actually strengthened again, with the U.S. dollar staying flat against the Swiss currency.

Could Negative Interest Rates Return?

Many experts believe that Switzerland could return to negative interest rates if inflation stays low or falls further. Adrian Prettejohn, a Europe economist at Capital Economics, said he expects the SNB to cut rates to -0.25% later this year, and possibly even lower if necessary.

“If inflation doesn’t rise, the SNB might go back to -0.75%, like it did in the 2010s,” Prettejohn told CNBC.

Lower interest rates usually help the economy by making borrowing cheaper and encouraging investment. But negative interest rates also have risks.

Risks of Negative Rates

If rates go below zero, savers may lose money on their savings. This can be hard on people who rely on interest income. Also, banks may earn less profit from loans, which could affect the entire financial system.

Charlotte de Montpellier added that long-term negative rates might distort financial markets and hurt bank profits, possibly leading to problems in the future.

“Negative rates can damage the financial system if they last too long,” she said.

What This Means for the World

Switzerland’s decision to cut rates while other countries keep them high is a sign of how different economies are facing unique challenges. While the U.S. and Europe are still battling rising prices, Switzerland is working to prevent a deflation spiral.

The SNB said it will keep watching the situation closely and will adjust rates again if needed to keep inflation under control in the long run.

This Breaking News shows how Switzerland is entering a new phase of zero interest rates, and possibly heading toward negative rates. With inflation falling and the Swiss franc staying strong, the country faces different economic challenges than most others in 2025. This move is likely to affect banks, savers, and investors, not just in Switzerland but across global markets.

Stay tuned for more Daily news highlights and updates on global interest rate trends.