Switzerland’s 10-year government bond yield has slipped to around 0.30%, its lowest level since early March, as persistent safe-haven demand coincides with a new round of central bank policy decisions. Most major central banks, including the US Federal Reserve, are expected to leave interest rates unchanged amid mounting global economic and geopolitical risks.
Domestically, the Swiss National Bank is widely anticipated to keep its policy rate at 0% at its March 19 meeting. Policymakers face a delicate trade-off between the inflationary effects of higher energy prices and the upward pressure on the franc driven by safe-haven inflows in the wake of the escalating conflict involving Iran.
Most economists expect the SNB to lean on foreign exchange intervention rather than push rates back into negative territory to curb franc strength. At the same time, the Swiss government has revised its economic outlook to reflect rising energy costs, now forecasting slightly weaker growth and modestly higher inflation for this year.
