The Swiss National Bank expects to maintain zero interest rates despite turmoil in the Middle East

Investing.com – UBS economists Maxime Botteron and Alessandro Bee stated that although the Swiss franc faces increased upward pressure, the Swiss National Bank (SNB) is likely to keep its policy interest rate unchanged at 0% in Thursday’s monetary policy assessment.

The Middle East conflict has driven up energy prices and caused the Swiss franc to appreciate. Economists estimate that these two factors have roughly offset each other’s impact on Swiss inflation.

Since the outbreak of the conflict, Brent crude oil prices have exceeded $100 per barrel, with a rise of over 50% when measured in Swiss francs.

According to UBS estimates, current oil prices are up 30% year-over-year, contributing no more than about 0.3 percentage points to inflation. If oil prices remain at current levels during the second quarter of 2026, the contribution of rising petroleum product prices to overall inflation could increase to 0.4 percentage points.

As of February, Switzerland’s inflation rate was 0.1% year-over-year.

The Swiss franc has strengthened against the euro, possibly due to increased market demand for safe-haven currencies.

EURCHF fell below 0.90 on Monday, meaning the Swiss franc has appreciated more than 3.5% against the euro since the Swiss National Bank’s December interest rate decision. If the exchange rate stays at this level, it could reduce overall inflation by about 0.35 percentage points.

Economists believe that the direct effects of the conflict on energy prices and the Swiss franc largely offset each other, leaving Switzerland’s inflation outlook broadly unchanged. However, downside risks have increased, as high energy prices could dampen economic growth and raise deflationary pressures.

A stronger franc puts pressure on Swiss exporters and the broader growth outlook. The Swiss National Bank has indicated increased willingness to intervene in the foreign exchange market, signaling concern over the rapid appreciation of the franc.

UBS economists believe that geopolitical tensions’ impact on energy prices is typically short-term, so they expect the SNB to counteract the franc’s appreciation through foreign exchange purchases rather than rate cuts.

If the global growth outlook worsens—potentially due to a significant rise in energy prices—the likelihood of lowering policy rates into negative territory could increase.

Economists expect the Swiss National Bank to keep its policy rate at 0% at the March meeting and over the next 12 months.

Their main scenario is that increased German government spending will support growth in the eurozone and the euro, assuming oil prices fall back to around $70 per barrel, with EURCHF rising to 0.93 during the forecast period.

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