SNB May Need Subzero-Rate Option to Steer Franc, Tschudin Tells NZZ

This content was published on February 14, 2025 - 05:30

2 minutes

(Bloomberg) — The Swiss National Bank must have the ability to take interest rates below zero to efficiently control the strength of the national currency, according to board member Petra Tschudin.

“If necessary, it allows us to steer the rate differential also in a low-interest environment in a way that the franc becomes less attractive than other currencies and therefore doesn’t appreciate excessively,” she told the Neue Zuercher Zeitung newspaper in an interview published Friday.

The SNB also intervenes in markets to steer the franc, and Tschudin echoed SNBPresident Martin Schlegel in saying that it will continue to do so — even at risk of the US branding it a currency manipulator.

“Our goal is price stability — that means inflation between zero and 2%,” she said. “We use our instruments so we achieve this goal.”

Supported by the strong currency, Switzerland on Thursday reported the slowest consumer-price growth in almost four years — fueling fears that inflation may dip below the target range. Schlegel has said this may happen in some months but that the gauge will stay positive in the medium term.

Speaking to NZZ, Tschudin offered a personal anecdote on why the SNB won’t tolerate subzero inflation for an extended period.

“I had my nominal salary cut once in Hong Kong and once in Ireland when inflation was negative there,” she said. “As an economist, it made perfect sense to me, but let me tell you: Personally, I was extremely offended.”

“That’s the problem,” Tschudin added. “If inflation regularly falls below zero, you would have to regularly cut wages.”