SNB Will Go Negative If Needed, But Bar Is High, Schlegel Says
(Bloomberg) — A reintroduction of negative interest rates faces serious hurdles, though the Swiss National Bank would still be willing to embrace them should that become necessary, according to the institution’s president.
“The bar is high” for subzero borrowing costs, but “we are ready to go negative again” if a threat to mid-term price stability emerges, Martin Schlegel said in Zurich.
The SNB has reduced its benchmark to zero, meaning that it is now on the cusp of a move into that territory if policymakers decide that a decade high in the franc is likely to feed through to inflation. Schlegel — who on Friday called the central bank’s current policy “expansionary” — has repeatedly said that any additional cut would face a higher threshold than a conventional move.
Officials next meet on Dec. 11. A Bloomberg survey of economists published this week showed that analysts expect the SNB to keep rates unchanged through 2027 and then hike them in the first quarter of 2028.
Still, the strong Swiss currency remains a wild card. It reached a decade high against the euro in the wake of Switzerland’s recent trade deal with the US. The franc’s strength weighs on prices by making imports cheaper.
What Bloomberg Economics Says…
“After delivering 175 basis points of easing since March 2024, the SNB’s priority has now shifted to preserving policy space. The central bank appears ready to live with a stronger franc, relying instead on targeted foreign-exchange interventions and enhanced communication to anchor market expectations.”
—Jean Dalbard, economist. For full Insight, click here
Speaking more generally about monetary policy, Schlegel highlighted that the key drivers behind rate decisions are consistency, pragmatism and determination.
In weighing costs and benefits of various options, policymakers seek to find the decision with the best outcome in the biggest number of possible scenarios, he said, adding that this “risk management approach” accounts for the uncertainty officials decide under.
Elaborating on the drivers, he said that rate setters want to show a firm commitment to price stability and medium-term orientation as well as stress that they are always ready to take decisive action when necessary.
“Uncertainty must not mean indecision,” Schlegel said in slides published alongside his presentation to regular observers of the central bank in Zurich.
In Friday’s speech, Schlegel — giving an overview of the SNB’s decision process — stressed the institution’s established stance that officials can always move to adjust policy, even between their scheduled quarterly meetings.
The institution’s monetary policy assessment spans two days, the central bank chief said. On the first day, experts from key divisions — including Economic Affairs, Money Market and Foreign Exchange and Financial Stability — present analyses on global and domestic economic trends, inflation and financial stability risks.
Based on this, the Governing Board evaluates on the second day whether the interest rate is still appropriate or needs to change, he added. Important information officials take into account include the franc’s exchange rate and the status of the domestic economy — gauged through approximately 250 talks local SNB delegates hold with Swiss companies every quarter.
After the decision, the three policymakers approve the communication materials, which include the conditional inflation forecast, Schlegel said.
Schlegel stressed that the procedure the SNB applies before a rate decision is always the same, regardless of economic circumstances.
“It’s like a Swiss watch,” he said. “It’s very important to follow the established process, especially if the situation is turbulent and unclear.”
©2025 Bloomberg L.P.
