SNB Seen Resisting Urge to Go Negative in Fight Over Franc Gains

(Bloomberg) — The Swiss National Bank will avoid cutting its interest rate below zero this year in its struggle to contain the strength of the franc, according to economists. 

Goldman Sachs Group Inc. has the sole forecast for a return to negative borrowing costs in Bloomberg’s survey of analysts on the path for the central bank’s monetary policy. Most predict that officials will keep the rate at the current level of 0.25%. 

That outlook suggests policymakers may need to resort instead to selling the franc to stem gains that have seen it rise to a decade-high against the dollar amid market turmoil incurred by US President Donald Trump’s tariff war.

The SNB has been careful not to rule out negative rates to prevent consumer prices from falling too far, and to insulate the country’s exporters from currency strength. 

But officials acknowledge that the pain they inflict on the financial system isn’t ideal. The country had the world’s lowest benchmark borrowing costs, at -0.75%, until the inflation crisis hit in 2022. 

The central bank cut its rate last month, while indicating it was done with easing for now. SNB President Martin Schlegel said at the time that the probability of further action there “is naturally lower.”

If policymakers do opt for market interventions, that would revisit a familiar playbook for the SNB, which bloated its balance sheet through such action before the inflation crisis of recent years allowed it to start a wind-down. 

Such a policy risks incurring the wrath of Trump, whose first administration branded Switzerland a currency manipulator in 2020. His Swiss counterpart, Karin Keller-Sutter, told Bloomberg Television last week that she’s not worried about a repeat of that. 

“It doesn’t concern me because it’s not true,” she said. “We’re not manipulating anything.”

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