SNB Rate Cut Below Zero Not Warranted for Now, Tschudin Says
(Bloomberg) — The Swiss National Bank sees no reason to cut interest rates below zero at present but that can always change, policymaker Petra Tschudin said in a television interview.
With price growth within the range targeted by the central bank, the current level of borrowing costs is appropriate, but it’s “hard to say” now what will happen at the next decision in December, she told Swiss TV station TeleZueri, according to a press release from the broadcaster on Tuesday.
“If you look at our inflation forecasts, you can see that over the medium term, inflation is between 0 and 2%. From that perspective, interest rates are where they should be,” Tschudin said. Even so, “the world is changing so fast. There is a great deal of uncertainty at the moment.”
The day before the release of her comments, data showed Swiss inflation unexpectedly slowed in October to just 0.1%, casting doubt on the central bank’s assertion that price growth is set to pick up.
In separate remarks on Tuesday, SNB President Martin Schlegel repeated that view. Consumer price-growth should accelerate slightly in the quarters ahead, he said, according to a slide presentation published on the central bank’s website.
Schlegel also said that US tariffs are damping global growth. He predicted economic expansion in Switzerland of between 1% and 1.5% for this year and at 1% for 2026, curbed by American levies of 39% on Swiss goods. Such a performance would still be slightly better than previously forecast by the SNB, which previously anticipated just under 1% next year.
At their last meeting, SNB officials argued that a further reduction of borrowing costs was unnecessary because earlier cuts to zero would feed through in due course. According to the current forecast, the central bank expects consumer price growth to average 0.4% over the fourth quarter.
The franc’s strength depresses inflation by making imports cheaper. Haven inflows from investors have propelled the currency to near decade-highs against both the euro.
“Whether the franc is currently valued correctly, whether it is overvalued or not, is not really that important for us in terms of monetary policy,” Tschudin said. “What is important is how the exchange rate changes and whether this causes imported inflation to change.”
Some analysts have speculated that the central bank recently stepped into currency markets to curb the surge in the franc.
Tschudin said that the SNB is ready to use interventions, but declined to comment on whether the central bank is doing so right now. She added that the prospect that such action could irk the US wouldn’t stop officials from doing so.
Policymakers have stressed that, given the harm negative borrowing costs inflict on the financial system, any decision to deploy them would face a higher bar than a normal rate cut. Even so, this week’s surprisingly low inflation number has sparked renewed speculation of a reduction below zero at the next meeting on Dec. 11.
(Updates with Schlegel starting in fifth paragraph.)
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