Here’s a bold statement: The Swiss National Bank (SNB) is poised to keep its policy rate at zero through 2026, and economists overwhelmingly agree that negative rates are off the table—but why? And this is the part most people miss: It’s not just about inflation; it’s about the delicate balance between currency stability, economic growth, and the SNB’s strategic communication. Let’s dive in.
Bengaluru, December 8 (Reuters)—In a move that underscores stability over drastic measures, the Swiss National Bank is set to maintain its policy rate at zero for the second consecutive meeting this Thursday, a stance expected to hold firm through 2026. This decision comes as inflation lingers near the lower end of the SNB’s 0-2% target range, prompting a Reuters poll of economists to conclude that the likelihood of negative rates is minimal.
Despite inflation slowing to zero—the floor of the central bank’s target—38 out of 40 economists surveyed by Reuters between December 3-8 predict the SNB will keep its key interest rate unchanged on December 11. Only two economists foresee a cut to -0.25%, a stark contrast to earlier concerns about deflationary pressures.
But here’s where it gets controversial: While the consensus is strong, it’s largely driven by SNB Chairman Martin Schlegel’s repeated warnings about the “undesirable side effects” of negative rates. Schlegel has emphasized that the bar for cutting rates below zero is exceptionally high, and the SNB would instead intervene in the foreign exchange market to ensure price stability. This stance raises questions: Is the SNB overly cautious, or is this the right approach in a fragile global economy? We’d love to hear your thoughts in the comments.
The SNB’s last foray into negative rates lasted seven years, ending in mid-2022, as part of an effort to combat deflation exacerbated by the Swiss franc’s status as a safe-haven currency. During periods of market turmoil, investors flock to the franc, strengthening it and putting downward pressure on prices. But with inflation now stable, the SNB seems reluctant to revisit this strategy.
LOW RISK OF NEGATIVE POLICY RATE
Among the 25 economists who provided forecasts through 2026, 21 expect the policy rate to remain unchanged. Only five predict a quarter-percentage-point reduction next year, down from seven in September’s survey. When asked specifically about the risk of negative rates, 14 out of 17 economists (over 80%) deemed it low—a dramatic shift from June, when most saw it as high. Only three now view the risk as significant.
Florian Germanier, an economist at UBS, notes, “Inflation is likely to pick up in 2026 but stay within the SNB’s target range. From that perspective, there’s no need to cut rates further.” However, he cautions that monthly inflation could briefly turn negative, particularly if the Swiss franc appreciates due to safe-haven flows. “The SNB might intervene, but currency interventions are more likely than rate cuts,” he adds.
This brings us to another critical point: the SNB’s currency interventions. In April, the central bank stepped up its efforts to counter a safe-haven franc rally triggered by U.S. tariffs on Swiss exports. While the currency has since stabilized—rising just 0.4% in November—the SNB’s reserves have climbed to their highest level since February. A Reuters FX survey predicts the franc will strengthen by 0.8% against the euro over the next year, but will this prompt further action from the SNB? And this is where opinions diverge: Some argue that currency interventions are enough, while others believe the SNB should keep all options open.
Sophie Altermatt, an economist at Julius Baer, highlights the role of the SNB’s communication in shaping market expectations. “The SNB has made it clear they’ll tolerate short-term negative inflation as long as the medium-term outlook remains solid. That’s why markets aren’t expecting further rate cuts,” she explains. But is this tolerance sustainable, especially if global economic conditions worsen? Let us know what you think.
Inflation is projected to average 0.2% this year and 0.4% next year, according to the poll. Meanwhile, the Swiss economy is expected to grow by 1.2% in both years, up from 0.8% in 2024. Notably, this growth outlook remains unchanged despite the U.S. recently lowering tariffs on Swiss imports to 15%. The SNB has downplayed this move, calling it “welcome but not a game changer,” as only 4% of Swiss exports were affected by the higher tariffs.
“Domestic consumption is driving growth, and that part of the economy is doing fine,” Altermatt adds. But with global uncertainties looming, is Switzerland’s economic resilience enough to justify the SNB’s hands-off approach? We want to hear from you: Do you agree with the SNB’s strategy, or should they be more proactive? Share your thoughts below.
Reporting by Anant Chandak; Polling by Debrah Gomes; Editing by Hari Kishan, Ross Finley, and Paul Simao
Our Standards: The Thomson Reuters Trust Principles. Learn more
