Switzerland: Inflation Rises, but It Remains a “Safe Haven” for Finance

For the first time since August 2024, the country’s inflation rate exceeded the midpoint of the Swiss National Bank’s target range (0% to 2%). The main reason was the continued rise in imported energy prices, compounded by persistent uncertainty over developments in the Middle East.

Against this backdrop, investors expect the Swiss National Bank to keep its key interest rate unchanged at 0% through the end of 2026 and for much of 2027, possibly through the end of the year.

According to a survey conducted by the Swiss Bankers Association, 100% of respondents expect the rate to remain at 0% through the end of 2026. Around 60% of those surveyed believe it will stay at 0% throughout 2027, while 40% expect a modest increase—mostly to 0.25% or 0.5%—at some point during 2027.

The Swiss franc is adapting to changing currency-market conditions. Experts say negative interest rates remain a possible response to a serious economic shock, although they are not part of the central bank’s baseline scenario.

Switzerland has long been one of Europe’s islands of stability, and the Swiss franc has been regarded as a reliable refuge from inflation. Even today, the country’s currency remains one of the leading “safe havens.” The Swiss franc has risen sharply, reaching multi-year highs—including an 11-year peak against the U.S. dollar—as investors seek shelter from global geopolitical uncertainty, trade tensions, and political deadlock in neighboring European countries.

Rather than confronting runaway inflation, the franc’s appreciation has brought Switzerland to a point of very low inflation, close to disinflation (with inflation falling to nearly 0.1%), creating a different set of challenges for policymakers.

The Swiss National Bank faces a monetary-policy dilemma: by keeping its key interest rate at 0%, the central bank must watch the national currency appreciate rapidly, undermining the position of Swiss exporters and increasing the likelihood of negative interest rates or foreign-exchange interventions. In these conditions, foreign-exchange interventions, alongside interest-rate adjustments, are an important tool for the Swiss authorities. By purchasing assets denominated in foreign currencies, the central bank can help weaken the national currency. The Swiss authorities used this mechanism extensively for several years through 2022 to prevent excessive franc appreciation. As a result, the Swiss National Bank’s balance sheet grew to a size that some observers considered alarming.

Financial analysts in the euro area believe that capital inflows into the Swiss franc will strengthen again in late 2026 and early 2027, restoring the currency’s safe-haven status. As noted in a commentary by private bank UBP, the euro-franc exchange rate—much as it did during the euro-area debt crisis—is increasingly acting as a barometer of risk within the euro area.

Author: Candidate of Economic Sciences, Associate Professor, Department of World Economy and International Finance, Financial University under the Government of the Russian Federation, Natalia Vladimirovna Sergeeva