SNB Holds Rates at 0% in September; Markets Bet on Rate Hike as Early as Early Next Year
nashnova research
The Swiss National Bank held its benchmark rate at 0% on September 24, staying out of the global tightening cycle; but traders are losing patience — markets now price a 90%+ probability of a hike by early 2027, as franc weakness and rising oil narrow the SNB's room to stand pat.
Rate unchanged — so what are markets pricing?
The SNB kept its benchmark at 0%, among the lowest of any major central bank.
This means → the SNB still sees inflation as manageable and feels no urgency to follow the Fed or ECB higher.
But traders are front-running the pivot: LSEG data shows roughly even odds of a December hike, a 90%+ chance of a move by early 2027, and bets that the rate reaches 0.75%+ by September next year.
How can Switzerland keep rates this low?
The core reason is ultra-low inflation: Switzerland's August annualized rate was just 0.8% — far below the US, UK, and eurozone.
In plain terms = prices have barely moved, so the central bank has no pressing reason to raise.
Behind this sits a "safe-haven dividend" loop: foreign capital flows in → the franc strengthens → imports get cheaper → inflation stays subdued → the SNB can hold rates low.
Energy accounts for only about 3.5% of Switzerland's inflation basket (vs. roughly 7% in the eurozone), and hydropower and nuclear provide an extra buffer.
What is breaking this equilibrium?
Since the SNB's June meeting, the franc has weakened more than 2% against the euro and more than 1% against the dollar.
This means → the safe-haven loop is loosening — a weaker franc makes imports pricier, eroding the foundation that kept inflation in check.
Combined with rising oil and resilient US and European economies, UBS has already pulled forward its forecast for the SNB's first hike.
What do the experts say?
UBS economists concede: "While we see a low probability of inflation exceeding 2% over the next 12–18 months, the SNB has a history of surprising markets."
INSEAD professor Antonio Fatás notes that Switzerland's long low-inflation track record keeps expectations firmly anchored — "A central bank that can rely on low inflation expectations manages shocks more comfortably."
In plain terms = the SNB's confidence rests on decades of built-up low-inflation credibility — but credibility is not the same as standing still forever.
What to watch before the December meeting?
The key variable is the franc's exchange rate: if the depreciation trend persists, imported inflation will pressure the SNB to act sooner.
The SNB explicitly retained the option of foreign-exchange intervention — this reflects that the exchange rate has moved to the center of its policy radar.
The Bank of Canada and the Bank of England are expected to hike later this year — if the global tightening wave keeps spreading, the SNB's outlier stance becomes harder to maintain.
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