By Ed Frankl


Swiss inflation edged up in the final month of 2025, likely alleviating the pressure on the country's central bank to cut rates below zero.

Inflation climbed to 0.1% in December from 0.0% in November, the first rise in five months, Switzerland's statistics office said Thursday.

While lower-than-expected inflation in recent months and an economy that contracted in the third quarter raised some expectations that the Swiss National Bank could cut rates again below zero, the inching up of inflation could allay some nerves among policymakers.

The SNB held its key rate at 0% for a second straight meeting in December, after six consecutive quarterly cuts. It said further cuts remained an option.

But its Chairman Martin Schlegel has repeatedly said there is a higher bar to cutting rates below zero than to lowering borrowing costs when rates were positive, given the strain it causes to savers, bank profits and pension funds. The Alpine nation had negative interest rates for more than seven years until September 2022.

The bank said in December that while inflation in recent months had been lower than forecast, in the medium term, inflation pressures were virtually unchanged compared to its prior meeting in September. Investors expect the SNB to hold its key rate again in March.

The SNB expects annual inflation to average at 0.3% for 2026 and 0.6% for 2027, after 0.2% in 2025.

The Swiss franc barely reacted on the inflation data. While it has been relatively stable against the dollar for months, it has gained more than 14% since the start of 2025, as investors flocked to the currency as a safe haven against geopolitical concerns.

A stronger franc against other currencies makes imports cheaper, thereby lowering inflation, but also makes exports more expensive and less attractive to consumers in other nations.

Recent U.S. tariffs have also added pressure on Switzerland's luxury watch and machinery industries, though 39% import duties threatened by the Trump administration were later reduced to 15%. The tariff hike prompted a 0.5% economic contraction between July and September, although economic performance is expected to have recovered toward the end of last year.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

01-08-26 0332ET