The Swiss National Bank (SNB) may need to resume active policy easing if the Swiss franc remains strong and global energy prices continue to fall in 2026, according to a research note from MUFG Bank.

MUFG analysts warn that sustained franc strength would put pressure on the SNB to respond with a combination of renewed currency intervention and potentially reintroducing negative interest rates. Although Switzerland recently exited negative rates, ongoing disinflationary pressures—particularly from lower oil prices—could weaken the SNB’s inflation outlook and complicate its monetary policy approach.

A return to negative interest rates could have wider market effects. MUFG highlights that this would likely make the franc more attractive as a funding currency, especially if global financial market volatility remains low and economic growth improves. Under these conditions, investors might once again borrow in francs to finance higher-yielding investments.

The report also points to external factors supporting the franc, including continued concerns over the Federal Reserve’s independence. Political or institutional uncertainty around the Fed may drive safe-haven demand for the franc against the US dollar, adding further upward pressure on the currency.

However, MUFG notes potential limits to the franc’s gains against the euro. Progress towards a peace settlement in Ukraine could diminish safe-haven demand within Europe, reducing support for the franc relative to the single currency. In this case, EUR/CHF might stabilise even if the franc remains strong versus the dollar.

In summary, MUFG’s outlook suggests that risks lean towards further SNB accommodation if current currency trends and declining commodity prices persist into next year, making it an important scenario for forex traders to monitor.

Original Source: Eamonn Sheridan of investinglive.com