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Negative interest rates ‘in interests of country’, says Swiss central bank

Published on February 14, 2025

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Negative interest rates 'in interests of country', says Swiss central bank — SNB Governing Board member emphasizes the importance of negative interest rates Keystone-SDA

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The Swiss National Bank (SNB) has defended negative interest rates as an important tool for taming the Swiss franc in a "small, open economy".

This content was published on February 14, 2025 - 11:48

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Petra Tschudin, member of the SNB’s governing board, told the Neue Zürcher Zeitung (NZZ) newspaper that even in a low interest rate environment, negative interest rates can be used to control the interest rate differential. This ensures the Swiss franc does not appreciate excessively against other currencies.

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“We pursue a monetary policy in the interests of the country as a whole,” she replied to the question of whether the SNB was pursuing an export promotion policy with its focus on the exchange rate. It is not about supporting one economic sector in particular, said Tschudin.

The exchange rate in Switzerland has a major influence on price stability. Ensuring this and keeping inflation between zero and 2% is the SNB’s goal, Tschudin said. “If inflation regularly falls below zero, wages would have to be cut on a regular basis.”

Central banks can combat deflation by cutting interest rates, but with a current key interest rate of 0.5%, the SNB no longer has much room for manoeuvre.

SNB stayed out of FX markets despite third-quarter franc rally

This content was published on Dec 31, 2024 The Swiss National Bank again refrained from significantly influencing the franc in the third quarter of 2024, even as the currency saw a rally.

Negative if necessary

SNB chair Martin Schlegel did not rule out negative interest rates at the end of January. “The SNB doesn’t like negative interest rates either,” Schlegel told Bloomberg TV at the World Economic Forum in Davos. But if the step becomes necessary, the SNB will take it.

Annual inflation in Switzerland fell further in January. However, the decline was limited, which is good news for the SNB. Inflation in January was still 0.4% after 0.6% in December, the Federal Statistical Office reported on Thursday.

Opinions differ on the impact of the latest inflation data on the SNB’s next interest rate decision. Some economists expect it to remain at the current level. For others, the question is when the SNB will lower the key interest rate to zero – and what the monetary policy course will look like afterwards.

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Translated from German with DeepL/mga

This news story has been written and carefully fact-checked by an external editorial team. At SWI swissinfo.ch we select the most relevant news for an international audience and use automatic translation tools such as DeepL to translate it into English. Providing you with automatically translated news gives us the time to write more in-depth articles.

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