The Swiss National Bank (SNB) is expected to maintain its policy rate at zero until 2026, according to a Reuters poll of economists. This decision comes as inflation remains near the lower limit of its target range. Despite the inflation rate slowing to zero, the majority of economists predict the SNB will keep its key interest rate unchanged on December 11th. Only two economists anticipate a cut to -0.25%.
The consensus is partly attributed to Chairman Martin Schlegel's stance on negative rates. He emphasizes the high bar for cutting rates below zero due to potential "undesirable side effects." The SNB has previously maintained negative rates for seven years until mid-2022 to combat deflationary pressures, exacerbated by a strong Swiss franc often favored by investors during market volatility.
The risk of negative policy rates is considered low, with 14 out of 17 economists agreeing. This is a significant shift from a June poll, where most economists predicted a higher risk. Florian Germanier, an economist at UBS, suggests that inflation is likely to remain within the SNB's target range in 2026, eliminating the need for further rate cuts. However, he also highlights the risk of monthly inflation turning negative and the potential for the Swiss franc to appreciate temporarily against the euro due to safe-haven flows.
The SNB has increased its currency interventions to stabilize the franc, which rose 0.4% in November. This move has allowed the central bank to boost its reserves to their highest level since February. Economists at Julius Baer, including Sophie Altermatt, note that the SNB's communication plays a role in the consensus, as they tolerate short-term negative inflation readings as long as the medium-term outlook remains solid. The Swiss economy is projected to expand by 1.2% in both 2025 and 2026, driven by domestic consumption.
