Switzerland's central bank (SNB) has reduced its key interest rate from 0.25% to 0.0%, citing easing inflation pressures. In May, consumer prices declined by 0.1% year-on-year, prompting concerns about potential deflation and the return of negative interest rates.

The SNB attributes the decline in inflation to lower prices in the tourism and oil sectors. It now forecasts inflation at 0.2% in 2025, rising to 0.5% in 2026 and 0.7% in 2027, assuming rates remain at zero.

While Switzerland's economy showed strong Q1 growth, boosted by accelerated exports to the U.S. ahead of potential tariffs, the SNB expects global economic growth to weaken, with diverging inflation trends: rising in the U.S. but falling further in Europe.

This move aligns with global monetary trends as other central banks, including the U.S. Federal Reserve, assess inflation risks and economic uncertainty fueled by geopolitical tensions and trade policies.