‘Switzerland must prepare for a return to negative interest rates’

BAK: 'Switzerland must prepare for a return to negative interest rates' Keystone-SDA

Given the low inflation, which in May stood at a four-year low of -0.1%, and the strength of the Swiss franc, negative interest rates could return in Switzerland.

+Get the most important news from Switzerland in your inbox

This is according to BAK Economics, which on the other hand considers the risk of a recession to be low. The Basel-based research institute expects the Swiss National Bank (SNB) to cut the key rate by a further 25 basis points to 0.0% next week. In fact, the monetary authorities are likely to refrain from going below zero for the time being. “That would require a more pronounced deterioration of the economy,” explained Claude Maurer, BAK’s chief economist, at a press conference.

+ The world’s strongest currency is also super-competitive 

Other factors, such as a further appreciation of the franc or lower rates in the eurozone, would be needed before the threshold could be crossed again. In principle, however, it is “certainly appropriate” to prepare for longer-term negative interest rates, the expert warned.

On the price front, the BAK experts do not see a general trend reversal for the time being. As they will recall, inflation had peaked in 2022 at 2.8%, rising to a 30-year high, and then dropped to 2.1% in 2023 and 1.1% in 2024. For 2025, the BAK now expects 0.1%, compared to the previous forecast of 0.4%; and in 2026, inflation will also remain low, at 0.2% (previously the estimate was 0.5%).

Gross domestic product (GDP) is also likely to be below average. “We expect Swiss economic growth to be rather flat this year and next,” said Maurer. Concretely, the expansion is expected to be 1.2% this year and 1% in the following twelve months. In BAK’s interpretation, the weak momentum is mainly due to Switzerland’s high savings rate. The population and the state are accumulating: as people tend more to save than to invest, the franc remains strong and interest rates low.

According to BAK, however, it seems unlikely that the country will enter a recession. On the contrary, consumers are likely to benefit more from falling rates and low inflation, both in terms of rents and electricity prices. Consumption and thus the economy should therefore remain stable. On the political level, Maurer expects a return to fewer trade restrictions: the current customs disputes may in fact lead Swiss politicians to show more willingness to lower trade barriers more quickly than previously assumed.

Translated from Italian by DeepL/jdp

How we work

We select the most relevant news for an international audience and use automatic translation tools to translate them into English. A journalist then reviews the translation for clarity and accuracy before publication.  

Providing you with automatically translated news gives us the time to write more in-depth articles. The news stories we select have been written and carefully fact-checked by an external editorial team from news agencies such as Bloomberg or Keystone.

If you have any questions about how we work, write to us at [e-mail]