SNB Negative Rates Are Now Off Almost All Economists’ Agendas

(Bloomberg) — Economists have largely abandoned forecasts that the Swiss National Bank will cut interest rates into negative territory, according to a Bloomberg survey.

Just two forecasters — Barclays and Bloomberg Economics — see SNB officials lowering borrowing costs by a quarter-point to -0.25% at the Dec. 11 policy meeting. Capital Economics predicts such a move next June.

Goldman Sachs and Pantheon Macroeconomics economists have changed their calls and now see zero as the terminal rate, as do the rest of the 15 analysts in the monthly survey.

That compares with as many as seven who predicted a further move to negative borrowing costs, right after the SNB benchmark went down to 0% in June. Ahead of the September rate decision, five forecast that the SNB would eventually go below zero.

Speaking after the Sept. 11 meeting, President Martin Schlegel stressed that it would take a lot for the SNB to reintroduce the subzero policy that was in place 2015-2022, given the fallout it imposes on the financial system.

“The bar to go into negative territory with interest rates is certainly higher than just a normal rate cut,” he said.

Jean Dalbard of Bloomberg Economics reckons currency markets may still ultimately force the SNB’s hand.

“The impact of a strong Swiss franc on domestic prices and the hit to growth of higher-than-expected US tariffs are key risks for the SNB,” he said. “We expect the Swiss central bank to cut rates in December if the currency remains strong.”

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