Swiss Central Bank Cuts Interest Rates to 0% as Inflation Turns Negative

In a move that has surprised many economists, Switzerland’s central bank has lowered its trendsetting interest rate to zero.

Saying inflationary pressures have eased considerably, the Swiss National Bank reduced its target interest rate by 0.25 percentage points, taking the key rate to 0%. The central bank noted that inflation in Switzerland fell into negative territory in May, necessitating an interest rate cut to boost the country’s economic activity.

The move by the Swiss Central Bank comes a day after the U.S. Federal Reserve elected to hold its key interest rate at its current range of 4.25% to 4.50%, where it has been since December of last year. The Bank of England also kept interest rates on hold at the conclusion of its latest policy meeting on June 19.

Uncertain Outlook

Central banks around the world are struggling with monetary policy at a time when economic activity is slowing but political instability is on the rise. Escalating conflicts in Ukraine and the Middle East, coupled with uncertain U.S. import tariffs, have rattled financial markets and clouded the outlook for central banks.

However, in Switzerland, the picture appears clearer as the economy and inflation decline. The Swiss National Bank attributes the drop in inflation to declining prices in the country’s tourism sector, as well to weak oil prices in recent months.

The Swiss central bank now projects annual inflation at 0.2% this year, before edging up to a half-point next year and 0.7% in 2027. Given the mild inflation outlook, the Swiss National Bank said it expects its target interest rate will remain at zero over the coming two years.

Is UBS Stock a Buy?

Let’s take a look at UBS Group (UBS), Switzerland’s largest bank. The stock of UBS has a consensus Moderate Buy rating among 12 Wall Street analysts. That rating is based on seven Buy, three Hold, and two Sell recommendations issued in the last three months. The average UBS price target of $36.84 implies 19.73% upside from current levels.

Read more analyst ratings on UBS stock