By John Revill ZURICH, March 19 (Reuters) - The Swiss National Bank kept its policy rate on hold on Thursday in the face of a surge in the value of the Swiss franc driven by the Iran war, which also
Swiss National Bank holds rates amid Iran war, watches franc strength
SNB Policy Decision and Market Impact
By John Revill
ZURICH, March 19 (Reuters) - The Swiss National Bank kept its policy rate on hold on Thursday in the face of uncertainty over the Iran war, and signalled its increased readiness to intervene in currency markets to curb a recent surge in the Swiss franc fuelled by a flight to safety amid the global turmoil.
The SNB maintained its benchmark interest rate at 0%, the lowest among major central banks, as expected by a wide majority of analysts polled by Reuters.
The decision came on a busy day for central banks, after the U.S. Federal Reserve on Wednesday kept rates unchanged, highlighting unusually high uncertainty as policymakers take stock of the impact of the U.S. and Israeli war with Iran.
SNB's Stance on Currency Intervention
Readiness to Intervene
READY TO INTERVENE TO COUNTER FRANC'S RISE
"Given the conflict in the Middle East, the SNB's willingness to intervene in the foreign exchange market has increased," said SNB Chairman Martin Schlegel, reiterating the message the central bank sent to markets earlier this month.
"We thereby counter a rapid and excessive appreciation of the Swiss franc, which would jeopardise price stability in Switzerland," he said.
The franc weakened briefly after the decision, but soon recovered to trade a touch higher against the euro and dollar.
Market Reactions and Analyst Commentary
"It wasn't a surprise the SNB didn't change its interest rate as it is waiting to get more evidence of the impact of the economic shock of the Middle East conflict before deciding what to do," said GianLuigi Mandruzzato, an economist at EFG Bank.
Sweden's central bank also held rates on Thursday and the European Central Bank and the Bank of England are expected to do the same later in the day.
The franc has remained near 11-year highs against the euro in recent days, as inflows intensified by the U.S.-Israeli strikes on Iran pushed up the currency, which acts as a safe haven at times of global turbulence.
The Swiss currency gained 14% against the dollar in 2025 and continued to rise this year, while it is up nearly 2.5% against the euro so far in 2026.
Karsten Junius, chief economist at J. Safra Sarasin, said he believed the SNB has already been intervening in the past weeks.
"The economic problems are centred in the export sector. FX-interventions are the best targeted measure to prevent further damage from the export sector which is why they should be the policy tool of choice now," Junius said.
The SNB stepped up foreign currency purchases last year amid trade turmoil fed by U.S. tariffs, but Schlegel declined to be drawn on how far it would go this year.
Governing board member Petra Tschudin also declined to say whether the SNB had already been active in the forex markets.
Implications for Swiss Economy
Marked appreciation in the franc makes imports cheaper, threatening to push inflation below the SNB's target range of 0 to 2%, while also making Swiss exports less competitive.
Swatch Group CEO Nick Hayek said the franc's gains threatened the future of Swiss industry and the SNB was not doing enough to tackle the problem.
Inflation Outlook and Future Rate Expectations
Inflation Projections
ZERO RATES SEEN THROUGHOUT 2026
Swiss annual inflation was just 0.1% in February and January, though in its updated economic forecasts, the SNB raised this year's inflation forecast to 0.5% from its 0.3% previous prediction.
Still, such low readings give the SNB some leeway to absorb price pressures from surging energy costs, especially given that petroleum products have a low weighting in Switzerland's consumer price basket.
Uncertainty and Policy Outlook
Schlegel said the levels of uncertainty were elevated with regards to forecasts, and depended on the evolution of energy prices.
"The SNB's message is essentially: keep calm and carry on. I expect the bank to look through the temporary, energy-driven rise in inflation linked to the Iran conflict and to keep the policy rate at 0% for the rest of the year," said Brian Mandt, chief economist at Luzerner Kantonalbank.
(Reporting by John RevillAdditional reporting by Ariane Luthi, Miranda Murray, Friederike Heine, Ludwig Burger, Madeline Chambers and Thomas SeythalEditing by Dave Graham and Tomasz Janowski)
