SNB: Is the chance of reintroducing negative interest rates low?

■ The Swiss National Bank (SNB) kept its policy rate steady for the second straight meeting and said it would adjust its stance if needed.  

■ If CPI stays low, intervention in the foreign exchange market can’t be ruled out to prevent downward pressure on prices from a stronger Swiss franc. 
 
   On November 11, the SNB decided to keep its policy rate at 0.0%. This marks the second consecutive time the rate has remained unchanged since September, following a 1-year and 9-month gap. The central bank noted that medium-term inflation pressures have hardly changed since the last meeting and remain within the range for price stability during the forecast period. The SNB stated that it will continue to closely monitor developments and adjust its monetary policy as needed to maintain medium-term price stability, while actively intervening in the foreign exchange market. Regarding inflation forecasts, the SNB lowered its 2026 inflation estimate to 0.3% and its 2027 forecast to 0.6%, down from its September outlook, based on the assumption that the policy rate will stay at 0.0% throughout the forecast horizon.  
 
   The November Consumer Price Index (CPI) remained flat year-over-year, primarily due to lower costs for food, non-alcoholic beverages, and transportation. Excluding volatile items like energy and fresh food, the core CPI increased just 0.4% year-on-year, reaching its lowest level since August 2021. If the CPI remains below the central bank's target range (0-2%), it could push prices even lower. To prevent excessive appreciation of the Swiss franc, the SNB doesn’t rule out foreign exchange intervention. SNB President Schlegel mentioned that negative interest rates could have negative side effects on savings and pension funds. Therefore, the threshold for reintroducing negative rates is high, but he emphasized that the central bank is prepared to do so if necessary. 
 
   Historically, during the 2011 European debt crisis, the Swiss franc appreciated rapidly while the euro weakened. Starting in September of that year, the SNB set a cap of 1 euro = 1.20 Swiss francs and engaged in unlimited currency interventions. In December 2014, Bank SNB introduced negative interest rates. During an emergency meeting in January 2015, it removed the exchange rate cap against the euro, stating that this measure was preventing a severe shock to the Swiss economy. At that time, the Swiss franc surged to 0.8588 Swiss francs. Regarding the current exchange rate, the Swiss franc is gradually strengthening against the euro because of the SNB's cautious stance on reintroducing negative interest rates, the forecast of moderate price increases after 2026, and the US reducing tariffs from 39% to 15%. Amid a weakening yen and a softer dollar, the exchange rate could fluctuate around the key level of 0.90 Swiss francs in the near future. However, given that the Swiss economy entered a period of negative growth in the July-September quarter, it remains to be seen if it will decline further, using the year's low of 0.9662 Swiss francs reached in March as a reference.