Swiss National Bank Chairman Considers Further Rate Cuts or Negative Rates

In Davos, Switzerland, on January 22, Swiss National Bank Chairman Martin Schlegel indicated that there is still room to further reduce interest rates, possibly going below 0%, if Swiss inflation remains low. Schlegel, speaking at the World Economic Forum, stated, "At the moment we are at 0.5%, this means that we still have some room." Despite no one in Switzerland favoring negative rates, he acknowledged that the bank would implement them again if necessary.

The SNB had imposed negative interest rates for nearly eight years starting in December 2014 but ceased the policy to address rising inflation post-COVID pandemic. In response to recent subdued inflation, around 0.6% in January and within the SNB's 0-2% target range since June 2023, the SNB reduced interest rates from 1% to 0.5%, its most significant cut in over a decade, with further reductions expected.

Schlegel mentioned that the central bank would assess the need for additional adjustments at its March meeting, stating, "At the moment, monetary conditions are appropriate, we decide from quarter to quarter and then we will see," without being able to provide a probability of rates turning negative.