Effects of the Middle East Conflict: Why Inflation and Mortgage Rates Remain Stable in Switzerland

The Exchange Rate as an Inflation Filter

A key reason for price stability in Switzerland lies in the function of the Swiss franc. In times of global uncertainty, the national currency tends to appreciate, which lowers the cost of imported goods. Since petroleum products and other energy carriers are traded internationally in US dollars, a strong franc dampens the rise in energy prices for domestic consumers. As a detailed study by Zürcher Kantonalbank (ZKB) shows, Switzerland is also significantly less dependent on fossil fuels than other European economies due to its specific energy mix, with a high proportion of hydropower and nuclear energy.

Smoothing Over Time Through Administered Prices

Another stabilizing factor is the structure of the national consumer price index (LIK). Around a quarter of the goods in the shopping basket are subject to government or partially administered prices. Especially with electricity tariffs, which in basic supply are only adjusted once a year, this leads to a significant delay in price transmission. This regulatory component gives the Swiss National Bank (SNB) the necessary room for maneuver. Economists at the ZKB assume that the SNB does not need to initiate any interest rate steps for now, but can wait for inflation trends to unfold.

Economic Risks and the Global Economy

The primary risk for the Swiss economy at present is less from domestic inflation and more from global economic developments. A weakening of the world economy or an uncontrolled appreciation of the franc would burden export-oriented companies. In such an environment, where GDP growth for 2026 is forecast at around 1.0%, restrictive interest rate hikes are unlikely. Instead, foreign exchange market interventions will likely remain the SNB's primary tool to avoid jeopardizing economic recovery.

Implications for Mortgage Strategy

The current data suggest that the SNB key interest rate will remain at a level of 0% at least until the end of 2026. This leads to the following points for financing planning:

• SARON mortgages: These will remain anchored at the lower end by the SNB's monetary policy, as long as no unexpected second-round effects occur with inflation.
• Fixed-rate mortgages: Due to global news flow, higher volatility is to be expected here, even if short-term rates remain stable.
• Affordability: Financial institutions are maintaining their imputed interest rates of 4.5% to 5% to protect borrowers from potential long-term interest rate shocks.