The Swiss National Bank (SNB) is prepared to reintroduce negative interest rates if necessary. “I would like to emphasize that lower interest rates plus negative interest rates are not excluded from our toolbox,” new SNB President Martin Schlegel said at an event in Zurich on Friday.
“No one likes negative interest rates, the SNB does not like negative interest rates, but if necessary, we are ready to take the next step,” Schlegel said. The SNB could use this instrument if necessary to dampen demand for the Swiss franc. The strong franc makes exports, which are important for the country’s economy, more difficult.
Schlegel expected the franc to remain popular as a safe haven for investors in times of political and economic uncertainty. Following Schlegel’s comments, the dollar rose against the franc to an 18-week high, while the euro turned positive after earlier losses.
Nearly eight years of negative interest rates in Switzerland
Switzerland is no stranger to negative interest rates. The country used this tool for almost eight years before returning to positive interest rates in September 2022. In March 2024, it reversed course again, becoming the first major central bank to initiate a rate-cutting cycle.
Since then, the SNB has lowered its key interest rate to one percent, opening the door wide to further monetary easing. The financial markets currently expect a 72 percent chance of a 25 basis point cut and a 28 percent chance of a 50 basis point cut before the next interest rate decision in December.
Inflation at its lowest level in three years
The latest easing was made possible by the decline in inflation, which has remained within the target range of zero to two percent for the past 17 months and fell to the lowest level in more than three years in October.
According to Schlegel, interest rates remain the SNB’s main instrument, supported by interventions in the foreign exchange market if necessary. The central banker, who took over as head of the central bank in October, indicated that he would not be deterred from selling or buying foreign currencies in the future by the possibility of being labeled a currency manipulator by the United States. “Our mandate is clear and focused on Switzerland,” he said, referring to the SNB’s inflation targets.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
