Switzerland’s 10-year government bond yield has climbed back above 0.41%, approaching its highest level since July 2025 and moving broadly in line with other major bond markets. Rising inflationary pressures and the risk of a protracted conflict in the Middle East have dimmed expectations for global interest rate cuts.
At the same time, persistent geopolitical uncertainty continues to bolster demand for the Swiss franc, underscoring its status as a safe-haven currency. This strength in the franc could put additional downward pressure on domestic prices and complicate the Swiss National Bank’s efforts to maintain price stability, with inflation currently at a very low 0.1%.
SNB President Martin Schlegel has repeatedly warned that an excessive appreciation of the franc driven by safe-haven flows could ultimately threaten Switzerland’s price stability. The central bank has already indicated it stands ready to intervene in the foreign exchange market if necessary.
Against this backdrop, the policy rate is expected to remain at 0%, with inflation forecast to edge higher only gradually. The bar for reintroducing negative interest rates remains high.
