• The SNB is set to hold its policy rate steady at its March 2026 meeting. But it is caught between two opposing forces: a strong franc is dragging prices down and surging energy costs threaten an inflationary shock;

• The franc’s deflationary impact is not severe enough to justify cutting rates deeper into negative territory. Instead, the SNB will lean on FX intervention to curb the currency’s strength, using the meeting to signal a greater willingness to intervene if needed;

•  Surging energy prices will drive inflation higher. However, with inflation currently near zero, the SNB has a significant margin before the upper end of its mandate is threatened. Our base case remains that the Iran conflict will not persist long enough to generate the sustained inflationary impulse needed to force a rate hike in 2026.

‍