By Elisa Martinuzzi
DAVOS, Switzerland (Reuters) -The Swiss National Bank still has room to cut interest rates again and even take rates below 0% if Swiss inflation falls too far, Chairman Martin Schlegel said on Wednesday, although he could not say how likely such a step would be.
“At the moment (rates) are at 0.5%,” Schlegel told Reuters at the World Economic Forum in Davos, Switzerland. “This means that we still have some room.
“In Switzerland no one likes negative interest rates. Also the Swiss National Bank doesn’t like negative interest rates. But if we have to do it, we would do it again.”
The SNB charged negative interest rates for nearly eight years from Dec. 2014 but exited the policy to tackle resurgent inflation after the COVID-19 pandemic.
Price rises have since slowed, with inflation within the SNB’s 0-2% target range since June 2023 and at 0.6% in January.
The SNB cut interest rates from 1% to 0.5% in December, its biggest reduction in more than a decade, and markets expect more cuts this year.
Schlegel said the central bank would see whether further adjustments were necessary at its next meeting in March.
“At the moment monetary conditions are appropriate, we decide from quarter to quarter and then we will see,” he said, adding he could not give a likelihood of rates going negative.
Although tariff hikes threatened by the new Trump administration in the United States would have only a limited effect on Swiss inflation, the safe haven franc could be affected by rising global uncertainties, he said.
“Whenever there is a crisis, investors tend to buy the Swiss franc,” Schlegel said. “This has some effect of course then on monetary conditions in Switzerland.
“The Swiss National Bank will look at monetary conditions, so interest rates on the one hand and exchange rates on the other hand, and we will analyse and see what the effects are.”
The SNB will also play a role in drawing up new banking regulations following the 2023 collapse of Credit Suisse and its subsequent takeover by UBS.
Schlegel said the Swiss model of financial regulator FINMA overseeing individual banks and the SNB working on the stability of the sector as a whole was generally working well.
“So I don’t personally see any need for a change here,” he said.
(Reporting by Elisa Martinuzzi in Davos and John RevillEditing by Dave Graham, Kirsten Donovan)
