Raiffeisen sharply upgrades Swiss growth forecast and sees zero-rate era ending

Raiffeisen has lifted its 2026 Swiss growth forecast to 1.7%, more than twice its previous estimate. The bank’s economists had projected expansion of 0.8%. They now see the Swiss economy recovering more firmly, supported by stronger-than-expected figures for the second quarter and continued momentum in pharmaceuticals.

The upgrade arrives as companies and households continue to navigate geopolitical uncertainty. Raiffeisen said the Swiss economy has so far felt limited effects from the war in the Middle East. Business confidence also held up after the conflict escalated again in September.

The bank’s new forecast excludes the effects of major sporting events, a measure intended to provide a clearer view of underlying economic activity. For 2027, Raiffeisen left its growth projection unchanged at 1.3%.

The revised outlook gives Switzerland’s policymakers a stronger domestic backdrop as they assess the next phase of monetary policy. Growth is no longer being described as fragile or heavily dependent on emergency support. Raiffeisen now argues that the economy is operating close to its potential, a condition that could make continued zero interest rates increasingly difficult to justify.

Pharmaceuticals provided the clearest lift to second-quarter activity. Raiffeisen identified the sector’s dynamism as a major reason for the stronger growth reading and the subsequent upgrade. Switzerland’s pharmaceutical industry remains a key pillar of the national economy, with its performance carrying weight well beyond the companies directly involved.

The bank did not publish a detailed sector-by-sector breakdown in the analysis. Its assessment nevertheless points to a recovery with a significant industrial component, rather than growth driven only by domestic services. Strong pharmaceutical activity has helped offset the pressure created by an uncertain international environment.

Business confidence has remained resilient despite the renewed escalation of the Middle East conflict in September. Raiffeisen said the Swiss economy has so far been little affected by the war’s consequences. That does not remove the risks facing exporters, manufacturers or energy-intensive businesses, but it indicates that companies have maintained enough confidence to keep operating and investing.

The outlook still depends on how external demand, energy costs and the franc develop. For now, the bank’s figures show a Swiss economy regaining momentum while maintaining a relatively stable business climate.

Raiffeisen has raised both of its inflation forecasts, adding pressure to its case for higher interest rates. The bank now expects consumer prices to rise by 0.7% in 2026, compared with its earlier estimate of 0.5%. For 2027, it projects inflation of 1.1%, up from 0.8%.

The bank attributed the revisions partly to high energy prices, whose effects are likely to last longer than previously expected. It also expects underlying inflation to increase as the Swiss franc weakens and foreign cost pressures build. Those forces remain moderate by international standards, but they point to a less benign price outlook than Raiffeisen had anticipated.

Inflation remains comfortably within the Swiss National Bank’s target range of 0% to 2%. That gives the SNB room to move carefully rather than respond to an immediate price shock. Yet the combination of stronger growth and firmer inflation changes the balance around monetary support.

Raiffeisen’s analysts therefore expect the SNB to raise interest rates soon. They argue that a policy designed to support a weak economy may become inappropriate when output approaches its potential and price pressures are gradually building. The bank’s forecast is an assessment, not a commitment from the central bank.

The next scheduled SNB assessment on December 10 could mark the end of Switzerland’s zero-interest-rate era, according to Raiffeisen. The bank’s analysts said SNB President Martin Schlegel could adjust rates as early as that meeting. The forecast places the timing of a possible policy shift within weeks, while leaving the decision firmly in the central bank’s hands.

A rate increase would signal that the SNB believes the economy can withstand less monetary stimulus. Raiffeisen’s argument rests on two linked developments: growth has proved stronger than expected, and inflation forecasts have moved higher. With the economy operating close to its potential, the bank sees less need to maintain exceptionally accommodative conditions.

For Swiss households, companies and financial markets, the implications would depend on the size and pace of any move. Borrowing costs could rise, while savers might eventually receive better returns on deposits. The franc could also respond to changing expectations, although Raiffeisen’s analysis does not provide a currency forecast.

The SNB’s target remains price stability, defined through its 0% to 2% inflation range. December’s assessment will show whether the central bank shares Raiffeisen’s judgment that the current policy setting has outlived its usefulness.