Negative inflation prints are possible this year, but a few months of negative inflation would not cause concern, according to the Swiss National Bank (SNB). At its most recent policy decision, the SNB kept all settings unchanged and offered a more optimistic outlook, partly due to lower US tariff rates.
SNB members, including Chairman Thomas Schlegel, emphasised that the threshold for returning to negative interest rates remains very high. Schlegel acknowledged the possibility of negative inflation occurring this year but stressed that it would not be problematic. Last year, markets anticipated negative rates as inflation approached deflation, but the SNB’s consistent resistance ultimately reversed those expectations.
A key challenge has been the Swiss Franc’s strength, which reached record highs against the Euro last year amid geopolitical concerns tied to President Trump’s tariffs. The Franc is considered a highly reliable safe-haven currency due to Switzerland’s political stability, neutrality, and strong fiscal and monetary discipline.
Looking ahead, the market does not expect any rate cuts this year, nor will there be rate hikes. As a result, the Swiss Franc’s movements will largely depend on broader risk sentiment. Attention is turning to developments in Greenland and the latest tariff threats from the US. A de-escalation in trade tensions would likely weaken the Franc, while further escalation could push the currency to new highs, increasing downward pressure on inflation.
Original Source: Giuseppe Dellamotta of investinglive.com
